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Audited condensed annual results for the year ended 28 February 2025
Delta Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2002/005129/06)
JSE share code: DLT
ISIN: ZAE000194049
(Approved as a REIT by the JSE)
("Delta" or the "Company" or the "Group")
SHORT-FORM ANNOUNCEMENT
AUDITED CONDENSED ANNUAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2025
SALIENT FEATURES
* Net operating income up 10.34% to R721.4m (FY24: R653.9m)
* Cost-to-income ratio improved to 47.8% (FY24: 49.6%)
* Weighted average lease expiry 14.7 months (FY24: 15.3 months)
* Covenant loan-to-value 59.5% (FY24:59.4%)
* Interest cover ratio improved to 1.4 times (FY24: 1.3 times)
* Property operating expenses decreased by 12.8%, from R483.9m to R422.0m
* Vacancy Rate decreased to 31.9% (FY24: 33.4%) or 18.4% (FY24:24.2%) when excluding non-current assets held for sale
* Successful renewal of debt facilities
INTRODUCTION
This report provides details of the Group's financial performance for the year ended 28 February 2025 ("the reporting period"
or "the period" or "FY25). The Group owns a diversified portfolio of 83 properties (FY24: 89) across South Africa, with a
total value of R6.4 billion (FY24: R6.6 billion). The portfolio consists of a gross lettable area (GLA) of 781 568m2,
comprising 577 183m2 of core and 204 385m2 of non-core properties. Delta's properties primarily provide commercial office
space to government departments, state-owned enterprises, and private sector tenants. A significant portion of the portfolio
is strategically positioned, with easy access to street-level retail offerings.
The Group continued to post financial results that demonstrate resilience amid ongoing challenging market conditions. The areas
of focus for this period have been meeting debt covenant requirements, signing new leases, ensuring lease renewals and disposal
of non-core properties as well as improving rental income collection.
The Group continues to make significant progress in key aspects of financial performance, including but not limited to disposal
of non-core properties, prudent debt management, managing costs, growing net operating income and enhancing leasing.
FINANCIAL RESULTS
Audited Audited
Year ended Year ended
28 February 2025 28 February 2024 % change
Rental income (R'million) 1 140.4 1 162.6 (1.9)
Net operating income (R'million) 721.4 653.9 10.3
Loss for the year (R'million) (104.2) (77.6) (34.3)
Basic and diluted earnings per share (cents) (14.6) (9.3) (57.0)
Basic and diluted headline earnings per share (cents) 10.4 15.9 (35.2)
Net Asset Value per share 3.4 3.5 2.9
Funds from operations/distributable earnings
per share (cents) 15.1 18.7 (19.3)
Investment property (R'million) 6 389.7 6 668.6 (4.2)
The Group continued to demonstrate resilience in a challenging operating environment, delivering stronger operational performance,
with net operating income increasing to R721.4 million, up from R653.9 million in FY24. This improvement was driven by stable
revenue, ongoing cost optimisation, and strategic property disposals. The Group reported a net loss of R104.2 million for the
year (FY24: R77.6 million), primarily due to non-cash fair value adjustment losses of R222.5 million (FY24: R217.2 million),
higher expected credit losses of R25.5 million (FY24: R2.6 million), and taxation of R32.0 million (FY24: R3.0 million). The fair
value adjustment includes a R43.6 million decline (FY24: R30.3 million) in the valuation of the Group's investment in Grit,
reflecting a sustained share price pressure, driven by weak emerging market sentiment, and currency volatility. The Group's
underlying performance remains sound, supported by disciplined cost control, stable operating income, strategic asset management,
and long-term value creation.
Revenue, excluding straight-line rental income accrual, has remained relatively stable with a marginal decrease of 2% compared
to the prior year. This decrease is primarily attributed to rental reversions and the vacancy at the SARS Bellville building,
which has a GLA of 16 005m2 and became vacant in the third quarter of the financial year.
Utilities recoveries increased by R14.1 million to R216.7 million compared to R202.6 million in FY24, highlighting the Group's
successful efforts in improving cost recovery processes. This increase reflects the Group's ongoing focus on enhancing operational
efficiencies and effectively recovering utility costs from tenants, which is expected to continue to support the Group's financial
performance.
Property operating expenses decreased by 12.8%, from R483.9 million in FY24 to R422.0 million; due to a reduction in assessment
rates, following the successful challenge of municipal property valuations as part of the Group's cost optimisation efforts.
Further savings were as a result of cost containment measures, including supplier changes, contract renegotiations, and the
disposal of non-core properties.
Administrative expenses increased by 5.4%, from R96.6 million in FY24 to R101.7 million mainly driven by inflationary pressures
and higher legal costs related to ongoing legacy litigation.
LETTING
During the reporting period, Delta renewed 79 leases, comprising a total GLA of 110 723m2, at a weighted average lease term of
2.4 years. In addition, new leases were concluded for a GLA of 22 068m2, with a weighted average lease term of 3.1 years.
Portfolio vacancies improved, decreasing from 33.4% in FY24 to 31.9% as at 28 February 2025. This improvement is primarily du e
to the disposal of six non-core properties with a combined GLA of 41 782m2 and the conclusion of new lease agreements referred
to above.
The weighted average lease expiry rate (WALE) decreased from 15.3 months to 14.7 months, mainly as a result of certain leases
reaching expiry and transitioning to month-to-month. The Group remains committed to securing longer-term lease agreements to
support the long-term stability and sustainability of the portfolio.
COLLECTIONS AND RECEIVABLES
As at 28 February 2025, trade receivables increased to R155.2 million (FY24: R87.9 million; as a result of delayed payments from
some of the key clients. The average collection rate for the period was 95.1% of billings, compared to 101.5% in the prior year.
A total provision for bad debts of R61.0 million was recognised at year-end (FY24: R56.5 million), representing approximately
40% of trade receivables. The ECL for the year amounted to R25.9 million (FY24: R2.6 million), attributable to increased accounts
receivable compared to the prior year.
Management remains confident in the recoverability of these balances and anticipates a positive resolution in the short to medium
term.
DISPOSALS
Delta has continued to dispose of non-core and largely vacant properties, in line with its ongoing portfolio optimisation strategy
driven by the objective of reducing debt. This strategic initiative has continued to reduce the Group's overall vacancy rate,
improve the cost-to-income ratio, and lower operational costs associated with holding vacant assets such as security and municipal
charges.
During the reporting period, six properties with a combined fair value of R154.9 million and GLA of 41 782m2 were transferred
for a total gross consideration of R158.0 million. Subsequent to year-end, further four properties with a fair value of R32.2
million and GLA of 9 673m2 were transferred for a gross consideration of R33.1 million. In addition, eight properties with a
combined fair value of R249.5 million and GLA 80 764m2 have been disposed of for a total gross consideration of R214.8 million
and are pending transfer.
The fair value adjustment loss recognised includes the impact of both independent valuations and auction sale prices. The auc tion
process was utilised on selected disposals to enable the efficient disposal of underperforming assets, particularly those wit h
high vacancies and limited upside potential. This exit strategy is expected to reduce ongoing holding costs, decrease vacancies,
and improve overall portfolio performance and profitability.
The Group remains confident in the trajectory of the property market and anticipates stabilisation of property values in the
short to medium term. Upon successful disposal of all properties earmarked for sale, the Group's LTV and ICR ratios are expected
to improve and align with covenant requirements.
FUNDING
During the reporting period, the Group successfully renewed maturing debt facilities with its funders. These included facilities
with Nedbank extended to 7 April 2025 and subsequently to 7 April 2026, Standard Bank renewed to 31 May 2026, Bank of China
renewed to 31 December 2026, and State Bank of India renewed to 7 June 2027. The Group also consolidated three Investec facilities
into a single facility, which was renewed to 7 March 2027. In line with its capital management strategy, the Group continues to
engage with its lenders regarding more favourable pricing, extending debt maturities, and restructuring amortisation profiles.
The short-term objective remains to achieve a debt maturity profile of between two and three years.
Total interest-bearing debt declined to R3.9 billion (FY24: R4.0 billion). Capital repayments for the year amounted to R237.5
million (FY24: R183.1 million), funded by R140.5 million in proceeds received on the disposal of the Sediba, VLU Fountain,
Smartxchange, Cape Road, 5/7 Elliot, and Trustfontein properties, R4.1 million from the Grit dividend received in May 2024, and
R92.9 million from scheduled principal repayments.
The Group also maintained revolving credit facilities of R64.3 million, of which R41.3 million had been drawn at year-end. In
addition, the Group has an overdraft facility of R95.0 million of which R79.5 million has been utilised.
Finance costs decreased to R463.0 million (FY24: R484.2 million), primarily as a result of capital repayments and interest rate
cuts. Despite two interest rate reductions of 25 basis points each by the South African Reserve Bank (effective 19 September 2024
and 31 January 2025), finance costs remain high. The likelihood of further cuts in the short term is moderate due to ongoing
geopolitical uncertainties. The weighted average cost of funding for the period was 11.2% (FY24: 11.4%). The Group's ICR improved
slightly to 1.4 times, and the covenant LTV ratio deteriorated marginally to 59.5%.
GOING CONCERN
The Board has carried out a review of the going concern assessment of the Group, as disclosed in the going concern note to the
financial statements. Having considered the solvency and liquidity and the cash flow projections, the Board is satisfied that
the Group is in a financial position to meet its cash requirements for the foreseeable future and accordingly is able to continue
trading as a going concern.
DIVIDEND
The Board, having performed a solvency and liquidity assessment as required by the Companies Act, resolved not to declare a
dividend for FY25 (FY24: Nil).
AUDIT REPORT
The Company's auditors, KMPG Incorporated, have issued an unmodified audit opinion on the annual financial statements for the
reporting period, which includes an emphasis of matter in respect of a material uncertainty related to going concern, as set out
below.
"We draw attention to Note 37 to the consolidated and separate financial statements, which indicates that the Group and Compa ny
incurred a net loss of R104.2 million and R123.8 million respectively during the year ended 28 February 2025 and, as of that
date, the Group and Company's current liabilities exceeded its current assets by R1.6 billion and R1.7 billion respectively. As
stated in Note 37, these events or conditions, along with other matters as set forth in note 37, indicate that a material
uncertainty exists that may cast significant doubt on the Group and Company's ability to continue as a going concern. Our opinion
is not modified in respect of this matter."
The full audit opinion, including the key audit matters, forms part of the FY25 AFS and is available for inspection at the
following weblink: https://www.deltafund.co.za/financial-results/
PROSPECTS
The South African listed property sector delivered a strong performance in December 2024 and the first quarter of the 2025
calendar year. However, despite these gains, the sector continues to trade at a notable discount to average net asset value
levels. Encouragingly, sector fundamentals have strengthened when compared to the pre-COVID-19 period, indicating a more resilient
foundation for long-term recovery. That said, the sector remains influenced by interest rate dynamics, which continue to affect
share price performance, investor sentiment, and access to capital. The operating environment remains complex, with ongoing cost
pressures driven by above-inflation increases in municipal rates and electricity tariffs, along with the need to maintain water
and energy supply contingencies. Given the low-growth environment, rental pressures may persist, especially in oversupplied
nodes. Nonetheless, these challenges are being actively managed as the sector adapts and evolves.
The Group remains confident in the sector's medium-term trajectory. The macroeconomic outlook includes improving business
sentiment, enhanced policy clarity particularly within the property sector and easing inflationary pressures, all of which are
expected to create a supportive operating environment. These external tailwinds, combined with the Group's disciplined and focused
execution of its strategic priorities, are anticipated to unlock value for the Group.
Looking ahead, the benefits of key strategic initiatives, including the disposal of non-core properties, we believe, will result
in the right sizing of operating costs and a strengthening balance sheet. Ongoing efforts to improve lease renewals, reduce
vacancies, and optimise cost structures are expected to continue to contribute positively to financial performance.
Supported by an improving macroeconomic climate, the Group is well-positioned to continue its recovery trajectory. A marked
improvement in operational and financial performance is anticipated over the medium term, underpinned by continued sectoral
recovery, enhanced stakeholder engagement, and a return to a more balanced risk-return environment positioning the Group for
sustainable long-term value creation.
SHORT FORM ANNOUNCEMENT
The content of this short-form announcement is the responsibility of the board of directors of Delta. This announcement is a
summary of the FY25 AFS published on SENS on 29 May 2025 and does not contain full or complete details.
Any investment decisions made by investors and/or shareholders should be based on consideration of the FY225 AFS. Shareholder's
are encouraged to review the FY225 AFS, which are available on the JSE cloudlink at
https://senspdf.jse.co.za/documents/2025/jse/isse/DLT/FY2025AFS.pdf and on the Group's website at
https://www.deltafund.co.za/financial-results/.
This short form announcement has not been audited or reviewed by the Group's external auditors.
By order of the Board
P Langeni S Masinga
(Chairman) (CEO) 29 May 2025
Date of release: 29 May 2025
Chairman: **Phumzile Langeni; Directors: *Sindi Zilwa, *Brett Copans, *Solly Mboweni *Thomas Tshepo Matlala
CEO: Sibongile Masinga; CFO: Zwelifikile Mhlontlo; Company Secretary: Vasta Mhlongo
*Independent non-executive director, **Non-executive 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
Java Capital
http://www.deltafund.co.za
Date: 29-05-2025 12:00:00
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