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DIPULA INCOME FUND LIMITED - Unaudited condensed consolidated interim results For the six months ended 28 February 2015

Release Date: 27/05/2015 12:33
Code(s): DIB DIA     PDF:  
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Unaudited condensed consolidated interim results For the six months ended 28 February 2015

DIPULA INCOME FUND
(Incorporated in the Republic of South Africa) (Registration number 2005/013963/06)
JSE share code for A-linked units: DIA     ISIN for A-linked units: ZAE000158317
JSE share code for B-linked units: DIB     ISIN for B-linked units: ZAE000158325
(Approved as a REIT by the JSE)
("Dipula" or "the company", and together with its subsidiaries, "the group")

UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS
for the six months ended 28 February 2015

HIGHLIGHTS

Distributable
earnings
up 33.2%

Revenue
up 24.6%

B-linked unit
distribution
up 9.3% to
35.346 cents

Half year
distribution
up 6.8% to
81.286 cents

A-linked unit
distribution
up 5.0% to
45.940 cents

Acquisitions
concluded during
the period
R742 million

Acquisitions
transferred
during the period
R534 million

Properties in
the process of
transfer
R391 million

Post period
transfers
R268 million

Post period
acquisitions
R261 million

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

                                                            Unaudited six   Unaudited six    Audited year
                                                             months ended    months ended           ended
                                                              28 February     28 February       31 August
                                                                     2015            2014            2014
                                                                    R'000           R'000           R'000
REVENUE
Property portfolio                                                300 733         241 354         485 669
Rental income                                                     274 764         223 175         461 036
Straight-line rental income accrual                                25 969          18 179          24 633
Total revenue                                                     300 733         241 354         485 669
Other income                                                          100               –           5 580
Property expenses                                                (58 861)        (45 303)        (92 017)
Administration and corporate costs                               (14 274)         (8 803)        (18 327)
Net operating profit                                              227 698         187 248         380 905
Fair value adjustments                                           (31 225)        (18 579)          69 821
Investment property                                              (25 379)        (18 579)          69 821
Interest rate swaps                                               (5 846)               –               –
Profit from operations                                            196 473         168 669         450 726
Net interest                                                     (70 355)        (56 335)       (117 911)
Interest paid                                                    (73 425)        (58 098)       (121 888)
Interest received                                                   3 070           1 763           3 977
Profit before debenture interest and taxation                     126 118         112 334         332 815
Debenture interest                                              (131 874)       (111 440)       (244 761)
A-linked units                                                   (73 822)        (62 769)       (132 550)
B-linked units                                                   (58 052)        (48 671)       (112 211)
(Loss) profit before taxation                                     (5 756)             894          88 054
Taxation                                                                –               –               –
Total comprehensive (loss) income for the year
attributable to equity holders                                    (5 756)             894          88 054

                                                            Unaudited six   Unaudited six    Audited year
                                                             months ended    months ended           ended
                                                              28 February     28 February       31 August
                                                                     2015            2014            2014
                                                                    R'000           R'000           R'000
Reconciliation of earnings, headline earnings
and distributable earnings
(Loss) profit for the year attributable to equity holders         (5 756)             894          88 054
Debenture interest                                                131 874         111 440         244 761
Earnings                                                          126 118         112 334         332 815
Change in fair value of properties                                 25 379          18 579        (69 821)
Headline earnings attributable to linked
unitholders/shareholders                                          151 497         130 913         262 994
Straight-line rental income accrual                              (25 969)        (18 179)        (24 633)
Lease cancellation income distributed                                   –           4 642           9 492
Fair value adjustment – Interest rate swap                          5 846               –               –
Antecedent interest                                                22 894               –             380
Amortisation of debt raising fees                                   2 604             431             888
Distributable earnings attributable to linked
unitholders                                                       156 872         117 807         249 121
Total number of linked units                                  385 975 166     309 962 824     309 962 824
Number of A-linked units in issue                            192 987 583*    153 941 061*    153 941 061*
Number of B-linked units in issue                            192 987 583*    156 021 763*    156 021 763*
Weighted average number of A-linked units in issue           164 044 125*    153 652 625*    153 798 028*
Weighted average number of B-linked units in issue           165 951 435*    155 675 849*    155 850 228*
Basic earnings per share (cents)                                   (1.74)            0.29           28.44
Headline earnings per share (cents)                                  5.95            6.30            5.89
Basic earnings per A-linked unit (cents)                            43.26           41.14          114.62
Basic earnings per B-linked unit (cents)                            33.24           31.55          100.44
Headline earnings per A-linked unit (cents)                         50.95           47.15           92.07
Headline earnings per B-linked unit (cents)                         40.93           37.56           77.89
Distributable earnings per A-linked unit (cents)                   45.940          43.752          87.504
– Interim                                                          45.940          43.752          43.752
– Final                                                               N/A             N/A          43.752
Distributable earnings per B-linked unit (cents)                   35.346          32.338          73.333
– Interim                                                          35.346          32.338          32.338
– Final                                                               N/A             N/A          40.995
NOTES TO THE STATEMENT OF
COMPREHENSIVE INCOME
Debenture interest
Debenture interest payable to linked unitholders                  156 872         117 807         249 121
Less: Debenture premium amortised                                 (2 104)         (6 367)         (3 980)
Less: Antecedent interst on linked units issued                  (22 894)               –           (380)
Charge per the income statement                                   131 874         111 440         244 761

* Excluding treasury shares.

The company does not have any dilutionary instruments in issue.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                                                Unaudited       Unaudited         Audited
                                                              28 February     28 February       31 August
                                                                     2015            2014            2014
                                                                    R'000           R'000           R'000
ASSETS
Non-current assets                                              4 731 179       4 058 221       4 165 368
Investment property                                             4 682 697       4 000 941       4 116 886
Goodwill                                                           48 482          48 482          48 482
Other non-current receivables                                           –           8 798               –
Current assets                                                    586 766         133 294         131 349
Trade and other receivables                                        85 060          30 926          70 575
Cash and cash equivalents                                         501 706         102 368          60 774
Non-current assets held for sale
Investment property held for sale                                  30 900           8 900          74 800
Total assets                                                    5 348 845       4 200 415       4 371 517
EQUITY AND LIABILITIES
Equity                                                            836 200         754 796         841 956
Stated capital                                                    427 852         427 852         427 852
Reserves                                                          408 348         326 944         414 104
Non-current liabilities                                         4 279 938       3 288 881       2 803 268
Debentures                                                      2 377 937       1 682 718       1 684 659
Interest-bearing liabilities                                    1 895 605       1 606 163       1 118 609
Derivative liability                                                5 846               –               –
Current liabilities                                               233 257         156 738         726 293
Interest-bearing liabilities                                            –               –         506 667
Trade and other payables                                           76 385          38 931          88 313
Linked unitholders for distribution                               156 872         117 807         131 313
Total equity and liabilities                                    5 348 845       4 200 415       4 371 517
Net asset value per A-linked unit (cents)                          832.73          791.70          815.13
Net asset value per B-linked unit (cents)                          832.73          791.70          815.13

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                                                                Stated
                                                              capital/       Fair      Accumu-
                                                                 share      value        lated      Total
                                                               capital    reserve         loss     equity
                                                                 R'000      R'000        R'000      R'000
Balance at 1 September 2013                                    427 852    400 024     (73 974)    753 902
Total comprehensive income for the six months                                              894        894
Transfer to fair value reserve – investment properties                      (400)          400          –
Balance at 28 February 2014                                    427 852    399 624     (72 680)    754 796
Balance at 1 September 2014                                    427 852    494 479     (80 375)    841 956
Total comprehensive loss for the six months                                            (5 756)    (5 756)
Transfer to fair value reserve – investment properties                        590        (590)          –
Transfer to fair value reserve – interest rate swap                       (5 846)        5 846          –
Balance at 28 February 2015                                    427 852    489 223     (80 875)    836 200

CONSOLIDATED STATEMENT OF CASH FLOWS

                                                                   Unaudited     Unaudited
                                                                  six months    six months
                                                                       ended         ended        Audited
                                                                 28 February   28 February     year ended
                                                                        2015          2014      31 August
                                                                       R'000         R'000           2014
Cash flows from operating activities                                (21 480)       (5 807)         15 287
Cash outflows from investing activities                            (525 479)     (265 938)      (346 837)
Cash inflows from financing activities                               987 891       320 025        338 236
Net movement in cash and cash equivalents                            440 932        48 280          6 686
Cash and cash equivalents at the beginning of the year                60 774        54 088         54 088
Cash and cash equivalents at the end of the year                     501 706       102 368         60 774

SEGMENTAL INFORMATION

                                                     For the six months ended 28 February 2015
Extracts from statement of                Retail          Offices   Industrial        Land          Total
comprehensive income                       R'000            R'000        R'000       R'000          R'000
Total revenue from property portfolio    149 911          101 260       23 593           –        274 764
Property expenses                       (31 474)         (21 435)      (5 952)           –       (58 861)
Net property income                      118 437           79 825       17 641           –        215 903
Extracts from statemen
of financial position
Investment property at fair value      2 728 867        1 666 629      274 451      12 750      4 682 697
Investment property held for sale          4 900           26 000            –           –         30 900

                                                     For the six months ended 28 February 2014
Extracts from statement of                Retail          Offices   Industrial        Land          Total
comprehensive income                       R'000            R'000        R'000       R'000          R'000
Total revenue from property portfolio    134 988           60 481       27 706           –        223 175
Property expenses                       (26 558)         (12 334)      (6 411)           –       (45 303)
Net property income                      108 430           48 147       21 295           –        177 872
Extracts from statement
of financial position
Investment property at fair value      2 366 698        1 183 658      450 585           –      4 000 941
Investment property held for sale          1 400            7 500            –           –          8 900

NOTES

1.  Basis of preparation
The unaudited condensed consolidated interim financial results for the six months ended 28 February 2015 have
been prepared in accordance with International Financial Reporting Standards (IFRS), IAS 34: Interim Financial
Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Reporting Pronouncements as issued by the Financial Standards Council, JSE Limited Listings Requirements and
the requirements of the South African Companies Act, 2008.

These results have been prepared by the Financial Director, Brigitte de Bruyn CA(SA).

The accounting policies adopted in the preparation of these results are consistent with those applied in the
preparation of the financial statements for the year ended 31 August 2014.

The directors are not aware of any matters of circumstances arising subsequent to 28 February 2015 that require
any additional disclosure or adjustments to the financial statements.

Comparatives restated
Due to the JSE Listings Requirements and the Financial Reporting Investigation Panel, the treatment of antecedent
income and debenture premium has resulted in comparatives for the period end 28 February 2014 being restated.
The results for August 2014 have already been reported and accounted for in the correct manner. Beneath is a table
which illustrates the effect the restatement has had on the statement of comprehensive income and earnings and
headline earnings. Selected reportable line items have been noted.

                                                                    Restated
                                                                 comparative    Published      Difference
                                                                        2014         2014            2014
                                                                       R'000        R'000           R'000
Profit from operations                                               168 669      168 669               –
Interest paid                                                       (58 098)     (58 098)               –
Interest received                                                      1 763        1 763               –
Amortisation of debenture premium                                          –        6 367         (6 367)
Profit before debenture interest and taxation                        112 334      118 701         (6 367)
Debenture interest                                                 (111 440)    (117 807)           6 367
Profit before taxation                                                   894          894               –
Earnings profit attributable to linked unitholders                   112 334      118 701         (6 367)
Headline profit attributable to linked unitholders                   130 913      137 280         (6 367)
Basic earnings per A-linked unit (cents)                               41.14        44.13          (2.99)
Basic earnings per B-linked unit (cents)                               31.55        32.70          (1.15)
Headline earnings per A-linked unit (cents)                            47.15        50.17          (3.02)
Headline earnings per B-linked unit (cents)                            37.56        38.66          (1.10)

2.  Summary of financial performance
                                                                   Unaudited    Unaudited         Audited
                                                                 28 February  28 February       31 August
                                                                        2015         2014            2014
                                                                       R'000        R'000           R'000
Distribution per A-linked unit (cents)                                45.940       43.752          87.504
– Interim                                                             45.940       43.752          43.752
– Final                                                                  N/A          N/A          43.752
Distribution per B-linked unit (cents)                                35.346       32.338          73.333
– Interim                                                             35.346       32.338          32.338
– Final                                                                  N/A          N/A          40.995
A-linked units in issue*                                         192 987 583  153 941 061     153 941 061
B-linked units in issue*                                         192 987 583  156 021 763     156 021 763
Net asset value per combined linked unit (cents)**                  1 665.46     1 583.40        1 630.26
Net asset value per A-linked unit (cents)                             832.73       791.70          815.13
Net asset value per B-linked unit (cents)                             832.73       791.70          815.13
Gearing ratio*** (%)                                                    35.5         38.1            37.3

*   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 short-term portion of 
    bank funding and excluding linked debenture liabilities, by total assets.

3.  Debt facilities as at 28 February 2015
Maturity                                             R'million
July 2016                                                111.8
August 2016                                              261.9
October 2016                                             150.0
November 2016                                             22.5
July 2017                                                125.0
November 2017                                            524.6
July 2018                                                434.2
October 2018                                              22.8
December 2018                                             31.7
January 2019                                              91.9
October 2019                                              27.2
November 2019                                             85.0
September 2027                                            11.1
                                                       1 899.7
4.  Interest rate swaps
Nominal amount                                     Expiry date
R70 million                                       October 2017
R506.7 million                                   December 2017
R85 million                                       January 2018
R21.3 million                                     January 2020

5.  Lease expiry profile (Unaudited)
                                               Average monthly
                                                  gross income
                                       GLA               R'000
Vacant                              58 851   
Expiring before 31 Aug 2015        118 212               9 655
Expiring before 31 Aug 2016        127 851               9 168
Expiring before 31 Aug 2017         95 831               6 564
Expiring before 31 Aug 2018         60 674               4 380 
Expiring After 31 Aug 2018         147 873              11 478
                                   609 291              41 245

6.  Payment of interim distributions
The Board has approved and notice is hereby given of interim distribution (distribution number 8) of
45.94007 cents per A-linked unit and 35.34590 cents per B-linked unit for the period ended 28 February 2015
set out below:

The distribution is payable to A- and B-linked unitholders in accordance with the timetable set out below:
                                                                                                     2015
Last date to trade cum distribution                                                     Thursday, 11 June
Linked units trade ex distribution                                                        Friday, 12 June
Record date                                                                               Friday, 19 June
Payment date                                                                              Monday, 22 June

Linked unit certificates may not be dematerialised or rematerialised between Friday, 12 June 2015 and Friday,
19 June 2015, both days inclusive.

A SENS announcement relating to the tax treatment of the distributions will be released separately.
A-linked units in issue at the date of declaration of interim distribution: 193 012 083
B-linked units in issue at the date of declaration of interim distribution: 193 012 083

Income tax number: 9743/798/14/3
Directors: ZJ Matlala (Chairperson)*, IS Petersen (CEO), BH Azizollahoff*#, B de Bruyn (FD), NS Gumede, E Links*,
Y Waja*, SA Halliday*
* Independent non-executive   # British

There were no changes to the Board during this period.
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

COMMENTARY

Profile
Dipula is a REIT, which owns a diversified R5.7 billion property portfolio (including transactions concluded), 
comprising retail, office and industrial properties. The properties are located across nine provinces in 
South Africa, with the majority in Gauteng.

Dipula trades under the codes DIA and DIB. DIA units are entitled a 5% preferred income growth while DIBs receive
the remainder of the growth.

Post the half-year period, Dipula internalised a substantial portion of its property management. The group expects
to realise future cost savings and efficiencies as well as improved property management.

Distributable earnings
During the six months ended 28 February 2015 ("the period") Dipula achieved an increase in distributable earnings
of 33.2% compared to the prior period, translating into a 6.8% growth in distributions per combined A- and B-linked
unit over the preceding period.

The distribution attributable to the A-linked units is 45.940 cents per unit (2014: 43.752 cents per unit) which
equates to a 5% increase from the previous year and is in line with the distribution policy for A-linked unitholders.

The distribution attributable to the B-linked units is 35.346 cents per unit (2014: 32.338 cents per unit). This equates
to a 9.3% increase on the prior year.

Property portfolio
The portfolio at 28 February 2015 consisted of 176 properties valued at R4.7 billion with a total gross lettable area (GLA) of
615 526 m(2).

Between 1 September 2014 and 28 February 2015 the group acquired properties with an aggregate value of R742 million. 
Subsequent to 28 February 2015 a further R261 million of properties were acquired, bringing the total acquisitions 
in this financial year to R1 billion.

During the period properties worth R534 million were transferred to the group. Subsequently, additional properties
worth R268 million transferred in, bringing total transfers during the current financial year to R802 million. Properties
worth R391 million are expected to transfer in by no later than 30 June 2015.

No properties were disposed of during the period under review. Subsequent to the reporting period, agreements
were entered into for the disposal of properties totalling R27 million. Of the R74.8 million properties held for
sale at August 2014 financial year-end, R43.9 million worth of assets had transferred out by 28 February 2015.
Subsequently properties worth R28.7 million have been transferred out.

When all acquisitions have transferred, the value of the portfolio will exceed R5.7 billion, excluding the pipeline of
further acquisitions, being negotiated.

The ratio of operating expenses to gross revenue averaged 21.4% (2014: 20.3%).

The segmental and geographic breakdown of Dipula's portfolio as at 28 February 2015 was as follows:

Sectoral profile by GLA (%)
Retail 58.9%
Office 20.3%
Industrial 20.8%

Sectoral profile by revenue (%)
Retail 54.6%
Office 36.8%
Industrial 8.6%

Geographic profile by GLA (%)
Gauteng 71.9%
KwaZulu-Natal 5.2%
Limpopo 4.6%
Western Cape 3.8%
Free State 3.5%
Mpumalanga 1.6%
Eastern Cape 5.2%
North West 3.8%
Northern Cape 0.4%

Geographic profile by revenue (%)
Gauteng 73.4%
KwaZulu-Natal 5.8%
Limpopo 4.4%
Western Cape 1.9%
Free State 2.8%
Mpumalanga 2.0%
Eastern Cape 5.3%
North West 4.2%
Northern Cape 0.2%

Vacancies
Vacancies relative to the August 2014 year-end increased marginally to 9.6%. Office vacancies decreased by 25.4%
to 14.1% from 18.8%. Industrial vacancies reduced by 11.5% to 4% (31 August 2014: 5%) and retail vacancies
increased to 10% (31 August 2014: 7%) mainly due to Ellerines vacating several of our properties following their
business rescue proceedings. Subsequent to the reporting period vacancies have decreased to 7.3%.

Commitments
Dipula has commitments for property acquisitions of R754 million 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%. Currently the all-in rate is 8.57%. The
company has total debt facilities of R2.2 billion, with R1.9 billion utilised to date.

An aggregate 72% of the debt has been fixed.

Issue of shares for assets
On 8 December 2014, Dipula issued 18 679 600 A-linked units at R9.59 per unit and 18 679 600 B-linked units at
a price of R7.47 per unit to Redefine as part of the acquisition of R425 million worth of properties. The units were
immediately placed with institutional investors.

The issue prices included an accrued distribution for the six months ended 28 February 2015 of 45.358 cents
combined, which translated into 25.635 cents for A-linked units and 19.723 cents for B-linked units. Excluding
the accrued distributions, the private placement linked units were issued at a price of R9.334 per A-linked unit and
R7.273 per B-linked unit.

Private placement
On 13 February 2015, Dipula successfully raised R400 million in terms of an accelerated bookbuild. The purpose of
the private placement was to fund previously announced acquisitions.

In terms of the offer 20 366 922 A-linked units were issued at a price of R11.20 and 18 286 220 B-linked units at a
price of R9.40. This increased the number of A-linked units to 193 million and B-linked units to 193 million.

The issue prices included an accrued distribution for the six months ended 28 February 2015 of 74.1 cents
combined, which translated into 41.879 cents for A-linked units and 32.221 cents for B-linked units. Excluding the
accrued distributions, the private placement linked units were issued at a price of R10.781 per A-linked unit and
R9.078 per B-linked unit.

Prospects
Growth in the property sector is a function of broader economic growth. South Africa has entered a period of slow
economic growth and rapidly increasing operating costs. This creates additional pressure on tenants, especially SMMEs.

Although it is not expected that interest rates will rise in this financial year, it is a possibility later in the calendar year.
It remains the objective to grow the portfolio during this financial year by between R1 billion and R1.5 billion through
further acquisitions.

Negotiations are well advanced in respect of portfolios with a cost of approximately R900 million. Combined with the
R1 billion of acquisitions already concluded these additional transactions will result in the R1.5 billion target being
exceeded by R400 million.

Assuming that trading conditions and the macroeconomic environment remain stable and there are no further major
tenant or corporate defaults, the Board's guidance in respect of combined distribution growth will be between 6.5%
and 7.5% for 2015, mostly as a result of Ellerines.

The forecast has not been reviewed or reported on by the group's auditors.

By order of the Board

Johannesburg
27 May 2015

Website: www.dipula.co.za



Date: 27/05/2015 12:33:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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