Wrap Text
Reviewed provisional financial statements for year ended 30 June 2015
DELTA INTERNATIONAL PROPERTY HOLDINGS LIMITED
(The “Company”)
(Registered by continuation in the Republic of Mauritius)
(Registration number 128881 C1/GBL)
JSE share code: DLI
SEM share code: DEL.N0000
ISIN: MU0473N00002 (Old ISIN number BMG2707T1018)
REVIEWED PROVISIONAL UNAUDITED FINANCIAL STATEMENTS for year ended 30 June 2015 (the “financial statements”)
DIRECTORS’ COMMENTARY
NATURE OF THE BUSINESS
The Company was initially incorporated in Bermuda on 16 May 2012 as a Bermudian exempted company under the laws of
Bermuda and has been operational since 1 June 2012. The Company was discontinued from Bermuda on 11 March 2015 and
was registered by continuation in Mauritius as a public company limited by shares on the same day. It holds a Category One
Global Business License as from 13 March 2015.
On 30 March 2015 the Company transferred its primary listing from the Bermuda Stock Exchange to the Stock Exchange of
Mauritius Ltd (“SEM”). On 10 July 2015, the Company moved its secondary listing on the Alternative Exchange (or AltX) of the
Johannesburg Stock Exchange (“JSE”) to a second primary listing on the main board of the JSE. The rationale for the migration
was to attract a more diverse shareholder base and to increase the liquidity of the shares.
The Company and its subsidiaries (“Delta International” or “the Group”) has been significantly restructured since the change in
ownership in May 2014. The Group has since embarked on a strategy of acquiring a portfolio of African real estate assets
(excluding assets situated in South Africa) in furtherance of its objective of investing in real estate assets that will provide strong
sustainable income from high quality tenants.
CAPITAL STRUCTURE
The capital structure of the Company increased significantly during the year. The two successful capital raises in July 2014
(issuing 43,254,376 shares, raising a net US$86.51 million) and in April 2015 (issuing 26,354,444 shares, raising a net US$38.89
million) and the other capital raises (issuing a total of 3,383,446 shares with net proceeds of US$6.19 million) increased the total
shares in issue from 664,180 shares in 2014 to 73,656,446 shares by the end of the 2015 financial year. The total increase in
share capital after deducting share issue expenses of US$4.48 million amounted to $127.10 million from $0.86 million in 2014.
The capital raise in April 2015 resulted in the Public Investment Corporation, the largest pension fund manager in Africa,
acquiring 19,054,810 shares in the Company which represents 25.87% of the issued shares. Stanlib has also subsequently
increased its shareholding to 9.01%
STRATEGY
The strategy for the Group (which is mandated by the board and is not expected to change once the new chief executive officer
is appointed) remains to acquire assets that provide a sustainable income from high quality tenants across the African continent,
while maintaining an accretive distribution over the long term. The company’s focus will remain solely on dollarised leases in
stable economies.
The Group’s immediate focus will be to capitalise on its knowledge base by expanding within its current jurisdictions of
Mozambique and Morocco. The current footprint and brand awareness in the existing jurisdictions has provided the Group with
a large pipeline of assets, which will allow the Group to select the highest yielding assets that fall within the Group’s investment
criteria. The Group will expand its property types to include the lucrative corporate accommodation in Mozambique.
Delta International’s next targeted jurisdiction will be Mauritius. The Group has already identified potential office buildings with
strong counterparty tenants in Mauritius which are being considered for the latter part of the financial year.
In a bid to maximise shareholder returns by reducing tax leakage, the Group has entered into contracts that will place the Group
in a position to convert the Moroccan structures to a REIT as soon as REIT legislation is promulgated. This is expected to take
place in quarter three of the 2016 financial year.
The long term strategy for new jurisdictions will focus on East Africa where the economies have embraced REIT legislation.
DISTRIBUTABLE EARNINGS AND COMMENTARY ON RESULTS
Following the maiden distribution of US$6.636 cents per share for the first six months to December 2015, the final distribution
for the last six months of the year will be US$4.648 cents per share. The full year distribution will amount to US$11.284 cents
per share.
The distribution of the 2016 financial year is expected to show growth of 3% to 5% (this information has not been reviewed or
audited by the company’s auditors).
The operating expenses’ resultant cost to income ratio for the year amounted to 24.98%, with this amount including a number
of costs associated with bedding down the new asset acquisitions, including a provision for doubtful debts of US$0.41 million in
relation to historic arrears which arose prior to transfer of the Anfa Place Shopping Centre.
The loss for the year amounted to US$0.65 million. This loss was largely due to the negative impact of the unrealised foreign
exchange loss of US$11.24 million. The bulk of this loss originates from the in-country revaluation of a US$70.94 million
shareholders loan to the Moroccan Dirham (“MAD”) (being the functional currency of the Moroccan subsidiary). The loan has a
term of ten years and as such, the loss is not expected to be realised in the short term. See below for commentary on the
performance of the Moroccan Dirham.
The Group’s loan to value ratio at the end of the year was 48.3%, marginally below the target of 50%. The difference is
attributable to the unrealised exchange gain arising from the Moroccan Dirham based loans and the valuation increase of the
investment properties.
The NAV per share at year end was US$168.91 cents per share (or US$169.75 cents per share excluding deferred tax). Currently
the shares are trading at a discount to NAV of 32% based on the current JSE market price of ZAR16.25.
The current portion of interest-bearing borrowings of US$91.17 million represents bridging facilities and accrued finance costs of
US$38.93 million related to Mozambique assets and vendor finance of US$52.24 million related to the Anfa Place Mall in
Morocco. The US$38.93 million debt related to the Mozambique assets was settled using the proceeds from the new term loan
with Standard Bank of South Africa Limited (“Standard Bank South Africa”) on 22 July 2015 (for the capital portion) and cash flow
from operations (for the accrued interest). The vendor finance of US$52.24 million (which is denominated in MAD) matures on
25 January 2016. The Group has entered into a discussion with a number of financiers and is confident that it will secure long
term funding before maturity.
REVIEW OF OPERATIONS
During the year, the Group has successfully acquired three commercial properties in Maputo, Mozambique and one retail asset
in Casablanca, Morocco. Before year end, the Group committed to purchase an additional retail centre, being the Zimpeto
Square in Maputo, Mozambique. All assets acquired during the year were in line with investment criteria of sustainable income
from high quality tenants.
Summary of Acquisitions
2 Acquisition Acquisition
GLA m Purchase price Grade Sector Location
Property yield date
Anadarko Building 7,805 $32.50 million A+ 10.03% July 2014 Offices Maputo, Mozambique
Anfa Place Mall 30,879 $114.68 million A 7.54% July 2014 Retail Casablanca, Morocco
Hollard Building 4,945 $14.94 million A 9.32% April 2015 Offices Maputo, Mozambique
Vodacom Building 10,660 $49.00 million A 6.63% May 2015 Offices Maputo, Mozambique
Mozambique
The Anadarko Building is operating as expected and remains 100% occupied. The day to day management of the property has
been bedded down and it is generating attractive returns on capital. The development of phase 2 of the Anadarko Building is
expected to commence by the end of 2015. In addition to the net rental income to be generated on the leased building, the
Group will share in the development fee without taking any development risk. The development fee is based on the Group’s
existing interest in the land. The development will be pre-committed with a long-term lease to Anadarko and will create
favourable growth on forward returns for the Group.
The Hollard Building transferred to the Group on 28 April 2015. The handover process has run smoothly, with few material
issues remaining by the reporting date. The building remains 100% occupied and the tenant lease rental collections have
remained virtually unchanged over the transition period.
The Vodacom Building has been transferred to the Group on 22 May 2015. The later than anticipated capital raise in April 2015
and the knock on effect this had in obtaining the foreign loan approval from the Bank of Mozambique, for the new Standard
Bank South Africa loan, required the Group to incur additional finance costs by raising bridging debt. The main debt facility was
paid out on 22 July 2015, and the acquisition is expected to be fully bedded down by mid-August.
The current Mozambique GDP growth of 7.1% is primarily based on the natural gas discovery, which is the world’s largest
natural gas find in the last decade. The strong economic indicators have lead the Group’s Mozambique assets maintaining a
100% occupancy level with limited tenant arrears.
Morocco
Anfa Place Shopping Centre has performed well since being bedded down after a difficult handover period. Footfall has
increased 13% year on year and vacancies in the main portion of the mall are down to 0.39%. The opening of MacDonald’s
completes a very strong tenant mix in the food court and is indicative of the Group’s selective improvements in attracting
exciting new brands to the existing line of top international brands. The Four Seasons hotel, adjacent to the street retail section
within the precinct, opens in November 2015 and will allow further reductions to the 7.64% total vacancy rate. Arrears are
monitored continuously with strong efforts on collections which are yielding positive results. The in-country centre management
team will continue to enjoy the support of top marketing skills from South Africa involved in developing the centre’s new
marketing strategy.
Historically the MAD has been a stable currency against the United States Dollar (“USD”). The MAD is a managed currency based
on a basket of currencies historically consisting of an 80% weighting of the Euro and 20% of the USD. In reaction to the
performance of the Euro in 2015, the Moroccan authorities took a proactive approach by reweighting the currency to 60% Euro
and 40% USD.
MAD/USD:FX:EXR
From 1 July 2014 to 30 June 2015, the USD gained c.20% in value against the Euro. Due to the fact that the MAD is managed as
per the high weighting to the Euro, this translates into the USD making significant value gains against the MAD (c.17% since 1
July 2015).
Although the MAD has lost significant value against the USD since 1 July 2014, this is linked to the poor performance of the Euro
rather than any underlying issues within the Moroccan economy, which still provides a strong investment case. The MAD has
strengthened against the USD in recent weeks and through continued strengthening will see USD earnings on Anfa Place
increase in the same manner.
CHANGES TO THE BOARD
On 14 April 2015 the Company announced that Gideon Louis Schnetler, Delta International’s chief executive officer and a
director of the Company, had tendered his resignation due to unforeseen personal reasons. With immediate effect, Bronwyn
Corbett, a director of Delta Property Fund and a material shareholder in her own right has been appointed as chief executive
officer.
On 1 July 2015, Leon van de Moortele replaced Greg Booyens as the Chief Financial Officer. The new chief financial officer brings
a wealth of knowledge gained from practical experience across the African continent, which together with the appointment of
the acting chief executive officer will provide sufficient capacity to continue the Group’s growth strategy. Greg Booyens has
been appointed as the Chief Financial Officer of Delta Property Fund Limited, a 30% shareholder of Delta International, but will
remain as an executive director of the Company for the immediate future.
Although Paul Simpson resigned as a director, he continues to form part of senior management with a specific focus on the
Moroccan asset while contribution to the overall group strategy.
A summary of the changes to the board are as follows:
Resignations
- Paul Simpson 14 August 2014
- James Keyes* 10 March 2015
- David Brown* 10 March 2015
- Gideon Louis Schnetler 7 July 2015
Appointments
- Peter Todd 14 August 2014
- Chandra Kumar Gujadhur 1 July 2015
- Ian Macleod 1 July 2015
- Leon van de Moortele 1 July 2015
*linked to the delisting in Bermuda
SUBSEQUENT EVENTS
On 15 July 2015, the Group concluded the loan agreement for the funding of the Hollard and Vodacom buildings in Maputo,
Mozambique with Standard Bank South Africa for an amount of US$38.00 million. The loan has a term of three years and is
priced at three month Libor plus 5.40%. The proceeds of the loan will be utilised to settle the current bridging facilities of
US$24.30 million from Standard Bank Mozambique and US$14.00 million from Standard Bank South Africa.
On 9 July 2015, following the latest capital raise of 2,645,556 shares on 30 June 2015, the Group finalised the Promissory
Purchase and Sale Agreement for the purchase of Zimpeto Square (with 4,764sqm of GLA) for US$10.70 million. The Group
placed a deposit of US$4.50 million with the sellers on 15 July 2015. The balance of the purchase price will be financed by
Nedbank Limited in South Africa with terms currently under negotiation.
GOING CONCERN
The directors are of the opinion that the Group has adequate resources to continue operating for the foreseeable future and
that it is appropriate to adopt the going concern basis in preparing the Group’s financial statements. The directors have satisfied
themselves that the Group is in a sound financial position and that it has access to sufficient borrowing facilities to meet its
foreseeable cash requirements.
Any forecast included above has been based on assumptions, including assumptions that a stable regional, political and
economic environment as well as a stable global macro-economic environment.
By order of the Board
Apex Fund Services (Mauritius) Ltd
Company Secretary
6 August 2015
Reviewed Audited for the
unaudited for ten months
Consolidated statement of comprehensive income Year ended 30 ended 30 June
June 2015 2014
$ $
Gross rental income 13,918,198 -
Straight-line rental income accrual 2,622,295 -
Revenue 16,540,493 -
Investment income - 63,156
Property operating expenses (3,477,760) -
Net property income 13,062,733 63,156
Other income 384,061 -
Administrative expenses (1,711,296) (48,509)
Profit from operations 11,735,498 14,647
Acquisition fees (3,291,940) -
Acquisition fees - Asset management fees (2,098,563) -
Acquisition fees - Other (1,193,377) -
Set-up costs (829,279) (28,494)
Fair value adjustment on investment property 4,560,458 -
Disposal in investment in subsidiaries - (33,401)
Gain from bargain purchase 3,504,523 -
Unrealised foreign currency loss (11,803,314) (157)
Realised foreign currency gain 551,853 -
Profit/(loss) before interest and taxation 4,427,799 (47,405)
Interest income 708,334 59
Finance costs (4,257,150) -
Profit/(loss) for the period before tax 878,983 (47,346)
Current tax expense (78,542) -
Deferred tax expense (617,062) -
Profit/(loss) for the period after tax 183,254 (47,346)
(Loss)/profit on translation of functional currency (838,254) 83,734
Other comprehensive income - -
Total comprehensive income (654,875) 36,388
Reconciliation of earnings, headline earnings and
distributable earnings
Basic earnings 183,379 (47,346)
Less: Fair value adjustments on investment property (4,560,458) -
Change in fair value of investment property (4,560,458) -
Deferred taxation on investment property
revaluation - -
Headline loss attributable to shareholders (4,377,079) (47,346)
Less: Straight line rental income accrual (net of
deferred taxation) (1,815,090) -
Straight line rental income accrual (2,622,295) -
Deferred taxation 807,205 -
Unrealised foreign currency exchange differences 11,803,314 157
Disposal of subsidiary - 33,401
Acquisition costs of investment property 3,626,253 -
Acquisition costs - asset manager 2,098,563 -
Acquisition costs - debt structuring fees included in
interest expense 334,313 -
Acquisition costs – other 1,193,377 -
Setup costs 829,279 -
Gain from bargain purchase (3,504,523) -
Retained distributable (profit)/loss (175,538) 13,788
Distributable earnings attributable to shareholders 6,386,616 -
Less: Distribution declared
Interim 2,963,433 -
Final (declared after 30 June) 3,423,183 -
Distributable earnings attributable to shareholders - -
Number of shares in issue at interim 44,656,446 664,180
Number of shares in issue at year end 73,656,446 664,180
Weighted average number of shares 47,104,830 664,180
Earnings per share
Basic and diluted profit/(loss) per share (cents) 0.39 (7.13)
Headline and diluted loss earnings per share (cents) (9.29) (7.13)
Distribution per share - -
Distribution per share (cents) – interim 6.64 -
Distribution per share (cents) - final (declared after 30
June) 4.65 -
Distribution per share (cents) - full year 11.28 -
Reviewed udited for the
unaudited for ten months
Consolidated statement of financial position Year ended 30 ended 30 June
June 2015 2014
$ $
Assets
Non-current assets
Investment property 210,390,631 -
Fair value of property portfolio 207,768,336 -
Straight line rental income accrual 2,622,295 -
- -
Property, plant and equipment 105,286 -
Intangible assets - -
Related party loans 91,665 275,734
Deferred tax 190,143 -
Total non-current assets 210,777,725 275,734
Current assets
Trade and other receivables 18,697,486 31,946
Cash and cash equivalents 6,565,282 649,328
Total current assets 25,262,768 681,274
Total assets 236,040,493 957,008
Equity and liabilities
Total equity attributable to equity holders
Share capital 127,958,794 864,655
Foreign currency translation reserve (785,389) 52,865
Retained (loss)/income (2,760,584) 19,471
Total equity attributable to equity holders 124,412,821 936,991
Liabilities
Non-current liabilities
Interest-bearing borrowings 10,490,966 -
Deferred tax 807,205 -
Total non-current liabilities 11,298,171 -
Current liabilities
Interest-bearing borrowings 91,165,629 -
Trade and other payables 8,671,832 20,017
Withholding tax payable 11,893 -
Current tax payable 137,756 -
Cash and cash equivalents 342,391 -
Total current liabilities 100,329,501 20,017
Total liabilities 111,627,672 20,017
Total equity and liabilities 236,040,493 957,008
Net asset value per share (cents) 168.91 141.07
Net asset value per share (excluding deferred taxation) (cents) 169.75 141.07
Reviewed Audited for the
unaudited for ten months
Consolidated statement of cash flows Year ended 30 ended 30 June
June 2015 2014
$ $
Cash utilised in operating activities (4,037,644) (334,135)
Interest received 708,334 59
Finance costs (4,974,543) -
Taxation paid (216,298) -
Dividends paid (2,963,434) -
Net cash utilised from operating activities (11,483,585) (334,076)
Acquisition of investment property (163,684,460) -
Net cash outflow on acquisition of subsidiary – investment
property (40,484,072) -
Net cash outflow on acquisition of subsidiary - other (6,881,174) -
Loans advanced to subsidiaries - (275,734)
Proceeds on disposal of subsidiaries - 926,369
Net cash from (utilised in)/generated from investing activities (211,049,705) 650,635
Proceeds from the issue of shares 131,570,847 -
Capital issue expenses (4,476,708) -
Proceeds from interest bearing borrowings 123,698,563 -
Settlement of interest bearing borrowings (22,685,849) 293,945
Net cash generated from financing activities 228,106,853 293,945
Net movement in cash and cash equivalents 5,573,563 610,504
Cash at the beginning of the year 649,328 38,824
Total cash at the end of the year 6,222,891 649,328
Condensed consolidated segmental
analysis Morocco Mozambique Mauritius Total
Geographical location 2015 Reviewed
Gross rental income 9,664,688 4,253,510 - 13,918,198
Straight-line rental income accrual 1,596,484 1,025,811 - 2,622,295
Property operating expenses (2,769,347) (708,413) - (3,477,760)
Net property rental and related income 8,491,825 4,570,908 - 13,062,733
Fair value adjustment (1,143,270) 5,703,728 - 4,560,458
Assets 104,690,631 105,700,000 - 208,790,631
Investment property at fair value 103,094,147 104,674,189 - 206,168,336
Straight-line rental income accrual 1,596,484 1,025,811 - 2,622,295
Retail Office Corporate Total
Type of property 2015 Reviewed
Gross rental income 9,664,688 4,253,510 - 13,918,198
Straight-line rental income accrual 1,596,484 1,025,811 - 2,622,295
Property operating expenses (2,769,347) (708,413) - (3,477,760)
Net property rental and related income 8,491,825 4,570,908 - 13,062,733
Fair value adjustment (1,143,270) 5,703,728 - 2,960,458
Investment Property 104,690,631 105,700,000 - 208,790,631
Investment property at fair value 103,094,147 104,674,189 - 206,168,336
Straight-line rental income accrual 1,596,484 1,025,811 - 2,622,295
Foreign
Retained currency Total
Consolidated statement of changes Earnings
in equity Share Capital
translation
reserve equity holders
$ $ $ $
GROUP 0 0 0
Balance as at 1 September 2013 66,817 864,655 (30,869) 900,603
Loss for the year (47,346) - - (47,346)
Foreign currency translation reserve movement - - 83,734 83,734
Shares issued - - - -
Share issue expenses - - - -
Balance as at 30 June 2014 19,471 864,655 52,865 936,991
Loss for the year (2,386,833) - - (2,386,833)
Dividends paid (2,963,434) - - (2,963,434)
Foreign currency translation reserve movement - - (838,254) (838,254)
Shares issued - 131,570,847 - 131,570,847
Share issue expenses - (4,476,708) - (4,476,708)
Balance as at 30 June 2015 (5,330,796) 127,958,794 (785,389) 121,842,609
Notes
1. Basis of preparation and accounting policy
The condensed consolidated financial statements are prepared in accordance with the requirements of the JSE Listings Requirements for
provisional reports and the requirements of the requirements of the Mauritian Companies Act 2001. The 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.
The reviewed accounts are issued following the board meeting approving the distribution for the final full year distribution.
This report has been compiled under the supervision of Leon van de Moortele CA(SA), the Chief Financial Officer of Delta International.
Delta International has complied with IFRS and JSE and SEM 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.
These provisional consolidated financial statements for the year ended 30 June 2015 have been reviewed by BDO Mauritius, who
expressed an unmodified unaudited review conclusion.
A copy of the auditor’s review report is available for inspection at the company’s registered office together with the financial statements
identified in the auditor’s report.
The audited financial statements for the year ended 30 June 2015 will be released pursuant to the Listing Rule 12.14 before 30 September
2015.
2. Declaration of final dividend
Shareholders are advised that dividend number 2 of US$4.64750 cents per share for the six months ended 30 June 2015 has been
declared. The source of the cash dividend is from rental income.
Salient dates related to cash dividend
Announcement of results of cash dividend on JSE and SEM Thursday, 6 August 2015
First date to trade cum dividend Friday, 7 August 2015
Last date to trade cum dividend Friday, 21 August 2015
Shares trade ex dividend Monday, 24 August 2015
Record date of dividend on SEM Wednesday, 26 August 2015
Record date of dividend on JSE Friday, 28 August 2015
Payment date of dividend Monday, 31 August 2015
- No dematerialisation or rematerialisation of share certificates nor transfer of shares between sub-registers in Mauritius and South
Africa may take place between Monday, 24 August 2015 and Friday, 28 August 2015, both days inclusive.
- Shareholders on the South African sub-register will receive dividends in South African Rand, based on the exchange rate to be obtained
by the Company on or before Friday, 14 August 2015. A further announcement in this regard will be made on or before Friday, 14
August 2015.
Date: 06/08/2015 01:34:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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