Wrap Text
Reviewed provisional results for the year ended February 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 company")
REVIEWED provisional
RESULTS
for the year ended February 2013
Key highlights
- Successful listing raised R980 million in equity
- Maiden distribution achieved per forecast of 23.69 cents per linked unit
- Annualised return to unitholders of 17.4%
- Market capitalisation of R1.39 billion
- Total investment property of R2.12 billion
- High occupancy of 95.6% across the portfolio
- Attractive forward funding rates of 7.9%
- Post year end acquisition growth of R2.3 billion
- Successful R1 billion rights offer completed
Reviewed provisional consolidated statement of
comprehensive income
Reviewed Audited
for year for year
ended ended
28 February 29 February
2013 2012
R'000 R'000
Revenue
Contractual rental income 116 867 42 745
Straight line rental income accrual 23 082 19 144
139 949 61 889
Property operating expenses (21 947) (2 877)
Net property rental and related income 118 002 59 012
Other income 10 454
Administration expenses (17 399) (9 671)
Listing expenses (21 659)
Restructuring expenses (20 000)
Net operating profit 58 954 49 795
Fair value adjustments 34 315 33 280
Profit from operations 93 269 83 075
Finance costs (55 446) (31 722)
Interest received 5 836 5 331
Profit before debenture interest and taxation 43 659 56 684
Debenture interest (39 068)
Profit before taxation 4 591 56 684
Taxation (21 916) (16 938)
(Loss) profit for the year (17 325) 39 746
Other comprehensive income
Total comprehensive (loss) income for the year (17 325) 39 746
Reconciliation of earnings, headline earnings
and distributable earnings
Total comprehensive loss for the year (17 325) 39 746
Debenture interest 39 068
Earnings 21 743 39 746
Change in fair value of investment property
(net of deferred taxation) (38 995) (28 389)
Change in fair value of property (49 122) (42 154)
Deferred taxation 10 127 13 765
Impairment of goodwill 2 893
Headline (loss) profit attributable to linked
unitholders (14 359) 11 357
Change in fair value of financial instruments (net
of deferred taxation) 21 005 6 389
Change in fair value of financial instruments 14 807 8 874
Deferred taxation 6 198 (2 485)
Straight line rental income accrual (net of
deferred taxation) (16 619) (13 784)
Straight line rental income accrual (23 082) (19 144)
Deferred taxation 6 463 5 360
Pre-acquisition income recognised against
investment property 6 455
Restructuring expenses 20 000
Deferred taxation other adjustments (874) (454)
Listing expenses 21 659
Impairment of other financial assets 2 196 (338)
Retained distributable earnings (395) (3 170)
Distributable earnings attributable to linked
unitholders 39 068
Number of linked units in issue 164 935 365 N/A
Weighted average number of linked units in issue 53 773 448 N/A
Basic earnings per linked unit (cents) 40.43 N/A
Headline/diluted headline loss per linked unit
(cents) (26.70) N/A
Distribution per linked unit (cents) 23.69 N/A
Reviewed provisional abridged consolidated statement of
changes in equity
Reviewed Audited
for year for year
ended ended
28 February 29 February
2013 2012
R'000 R'000
Stated capital 932 232
Balance at the beginning of the year
Issue of shares 932 232
Retained income 121 444 138 769
Balance at the beginning of the year 138 769 99 023
(Loss)/profit for the year attributable to
shareholders (17 325) 39 746
1 053 676 138 769
Reviewed provisional abridged consolidated statement of
cash flows
Reviewed Audited
for year for year
ended ended
28 February 29 February
2013 2012
R'000 R'000
Cash flows from operating activities (7 626) 3 450
Cash generated from operations 40 035 30 093
Net finance cost (47 447) (26 391)
Taxation paid (214) (252)
Cash outflows from investing activities (1 594 407) (58 644)
Net cash from financing activities 1 629 122 87 814
Net movement in cash and cash equivalents 27 089 32 620
Cash at the beginning of the year 29 739 (2 881)
Total cash at the end of the year 56 828 29 739
Reviewed provisional consolidated statement of financial
position
Reviewed Audited
for year for year
ended ended
28 February 29 February
2013 2012
R'000 R'000
Assets
Non-current assets
Investment property 2 119 112 388 381
Fair value of property portfolio 2 070 053 362 404
Straight line rental income accrual 49 059 25 977
Property, plant and equipment 279
Other financial assets 48 609
2 119 391 436 990
Current assets
Other financial assets 25 917 40 409
Trade and other receivables 39 410 938
Cash and cash equivalents 56 828 29 739
122 155 71 086
Total assets 2 241 546 508 076
Equity and liabilities
Equity
Stated capital 932 232
Retained income 121 444 138 769
1 053 676 138 769
Liabilities
Non-current liabilities
Debentures 189 676
Secured financial liabilities 832 450 289 829
Other financial liabilities 14 038
Deferred tax 57 207 31 541
1 079 333 335 408
Current liabilities
Secured financial liabilities 33 992 7 178
Trade and other payables 35 477 4 370
Current tax payable 214
Derivative instruments 22 137
Unitholders for distribution 39 068
108 537 33 899
Total liabilities 1 187 870 369 307
Total equity and liabilities 2 241 546 508 076
Commentary on results
1. Profile
Delta is a black managed property loan stock company that successfully listed on the JSE Limited
("JSE") on 02 November 2012. Delta's primary business is long-term investment in quality, rental
generating properties. On listing Delta raised R980 million in an oversubscribed private placement,
of which the proceeds were utilised to acquire additional properties and to restructure and reduce
Delta's overall gearing levels. The Company's portfolio currently consists of twenty high grade
commercial properties valued at R2.12 billion located in all provinces, except Mpumalanga.
2. Financial results
The reviewed provisional results reported on are for the financial year ended 28 February 2013.
These results include the impact of the restructuring of the Company, its portfolio and capital
structure in anticipation of the listing on the JSE on 02 November 2012. A direct comparison to
the previous reporting period, being the audited results for the 12 months to 29 February 2012,
is therefore not as meaningful as a comparison to the forecast results contained in the pre-listing
statement dated 23 October 2012.
The results for the year ended 29 February 2012 reflect a highly geared company which held a
single investment property, The Forum building. The property portfolio of the Company has changed
substantially between 29 February 2012 and 28 February 2013 and the Company has reduced its
gearing significantly to existing levels and as set out in the pre-listing statement. The results reported
for 28 February 2013 reflect these changes.
The Company achieved distributable earnings for the year of R39.068 million (forecast:
R39.050 million). The accrued distribution per linked unit of 23.69 cents for the four months since
listing is in line with the forecast of 23.68 cents.
3. Property portfolio
As at 28 February 2013, the portfolio, valued at R2.12 billion, consists of 20 properties with a total
GLA of 203 261 m² comprising 97% commercial offices and 3% retail (by value). A large proportion
of the office portfolio is leased to the National Department of Public Works and SARS under long
leases, with average escalation rates of 8.45%. The office portfolio represents a 72% sovereign
underpin to a substantial portion of the earnings and shields it from private sector risks such as
tenant insolvency.
The portfolio
GLA Value Value per m(2)
Property m(2) R'000 R/m(2)
Office government 121 719 1 470 037 12 077
Forum building 37 941 454 229 11 972
NPA Cape Town 10 552 161 027 15 260
110 Hamilton 4 511 77 200 17 114
Cooper House 2 111 22 548 10 681
Tivoli 2 759 17 118 6 204
Block G 7 992 194 016 24 276
Old Mutual building 3 294 24 400 7 407
Beacon Hill 13 648 185 000 13 555
Presidia 12 884 147 000 11 410
88 Field Street 21 105 133 000 6 302
Umtata 4 923 54 500 11 071
Office other 73 868 601 075 8 137
5 Walnut Road 14 041 91 300 6 503
SARS Springs 1 922 11 162 5 808
SARS Kimberley 2 950 32 000 10 847
PWC Polokwane 1 951 28 100 14 402
Cape Road 5 127 56 000 10 923
North Ridge Road 3 354 42 500 12 671
Liberty Towers 40 555 315 013 7 768
Richmond Forum 3 968 25 000 6 300
Retail
WB Centre 7 674 48 000 6 255
Total 203 261 2 119 112 10 426
The valuations prepared by an independent valuer, Active Blue Valuation Solutions CC, at 02 October
2012 for purposes of the listing were used for valuation purposes at year end.
Lease expiry profile
GLA Rental
Based on % revenue %
Vacant 4.4
February 14 42.5 34.3
February 15 13.9 12.6
February 16 10.3 13.7
February 17 4.3 5.6
February 18 1.2 1.3
>February 19 23.4 32.5
100.0 100.0
Condensed segmental analysis
Reviewed Admin and
for year ended Office Office corporate
28 February 2013 (R'000) Retail government other cost Total
Rental income (excluding straight
line rental income accrual) 2 683 83 978 30 206 116 867
Property operating expenses (639) (12 222) (9 086) (21 947)
Net property income 2 044 71 756 21 120 94 920
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
No segmental information has been presented for the Group for the financial year ended 29 February 2012 as the Group held
only one investment property which has been classified as office government in the current year.
4. Secured financial liabilities
During the year Delta restructured its debt facilities. At 28 February 2013, Delta's net borrowings of R866.4 million
equate to a gearing ratio of 38.7%. Gearing is calculated as total secured financial liabilities (excluding debentures) as
a percentage of total assets. The average interest rate for the year under review was 8.9% which included pre-listing
debt facilities which were subsequently restructured. At year end, interest rates were fixed in respect of 82% of the
borrowings for an average period of 2.8 years at an average all-in interest rate of 7.86%. To ensure effective cash
management, surplus cash is invested against revolving debt facilities.
5. Business combinations
Pursuant to its listing on the JSE, Delta acquired 100% of the voting rights and equity interest of Hestitrix Proprietary
Limited and Choice Decisions 300 Proprietary Limited with effect from 02 August 2012 and 02 October 2012,
respectively.
Details of the net assets acquired are as follows:
Choice
Hestitrix Decisions 300
Proprietary Proprietary
Limited Limited Total
R'000 R'000 R'000
Investment property 27 854 27 854
Property, plant and equipment 352 352
Straight line rental income accrual 246 246
Directors loans (14 557) (14 557)
Trade and other receivables 27 27
Cash and cash equivalents 89 89
Secured financial liabilities (5 938) (5 938)
Deferred tax (3 750) (3 750)
Trade and other payables (116) (116)
Total identifiable net assets 4 207 4 207
Goodwill 2 893 2 893
Purchase consideration settled in cash 7 100 7 100
Hestitrix Proprietary Limited was dormant at the date of acquisition.
6. Capital commitments
At 28 February 2013 Delta had the following contracted capital commitments:
Reviewed Audited
for year for year
ended ended
28 February 29 February
2013 2012
R'000 R'000
Capital commitments
Capital improvements in respect of investment property
Approved and committed 28 781
Approved not yet committed 34 370
63 151
These capital commitments will be funded out of existing cash resources and debt financing facilities.
7. Events after the reporting period
On 25 January 2013 and 19 February 2013 respectively, it was announced on SENS that Delta had entered into
agreements with various vendors to acquire 24 properties and the entire issued share capital of Hendisa Investments
Proprietary Limited for a combined purchase consideration of approximately R2.3 billion (including transaction costs).
The acquisitions will be 40% debt funded and 60% equity funded.
On 14 March 2013 Delta raised R207.8 million via a private placement through the issue of 24 740 304 linked units at
an issue price of R8.40 per linked unit. On 25 March 2013 Delta raised a further R382 million via a vendor consideration
placement through the issue of 45 476 878 linked units at an issue price of R8.40 per linked unit. As announced on
SENS on 06 May 2013, Delta successfully completed a rights offer raising R1 billion through the issue of 119 047 599
linked units at an issue price of R8.40 per linked unit.
8. Prospects
As per the revised listing particulars that were published on 08 April 2013, Delta currently forecast a distribution
per linked unit for the year ending 28 February 2014 of 72.50 cents per unit and 86.85 cents for the year ending
28 February 2015, representing a 20% year on year increase. These forecasts are the responsibility of the board of
directors of Delta and have been reviewed by the independent reporting accountants.
The board remains confident of the sustainability of government leases and the Company's empowerment credentials
which position Delta well for future acquisition of government tenanted buildings. The Company continues to consider high
quality assets and remains on track to meet its forecast fund size of R7 billion.
It is anticipated that the recently announced REITs legislation will positively impact the listed property sector.
9. Debenture interest distribution
Linked unitholders are advised that debenture interest distribution No. 1 of 23.69 cents per linked unit for the period
ended 28 February 2013 will be paid to linked unitholders in accordance with the abbreviated timetable set out below:
Last day to trade cum distribution Friday, 17 May 2013
Linked units trade ex distribution Monday, 20 May 2013
Record date Friday, 24 May 2013
Payment date Monday, 27 May 2013
Linked unitholders may not dematerialise or rematerialise their linked units between Monday, 20 May 2013 and Friday,
24 May 2013, both days included.
10. Basis of preparation, accounting policies and review opinion
The reviewed consolidated provisional 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 contains 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 are consistent with those applied in the prior period. BDO South Africa
Incorporated has reviewed the financial information set out in this report. Their unmodified review report is available for
inspection at Delta's registered office.
The Company 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)
06 May 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 company")
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: 204 Rivonia Road, Johannesburg (PO Box 652836, Benmore, 2010)
Transfer secretaries: Computershare Investor Services Proprietary Limited
Sponsor: Nedbank Capital
www.deltafund.co.za
Date: 06/05/2013 07:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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