Wrap Text
Reviewed provisional condensed consolidated financial results for the year ended 31 August 2015
Dipula Income Fund
(Incorporated in the Republic of South Africa) (Registration number 2005/013963/06)
JSE share code: DIA ISIN: ZAE000203378
JSE share code: DIB ISIN: ZAE000203394
(Approved as a REIT by the JSE)
("Dipula" or "the Company" or "the Fund", and together with its subsidiaries, "the Group")
REVIEWED PROVISIONAL condensed
Consolidated FINANCIAL Results
for the year ended 31 August 2015
Highlights
Distributable Full year A-share B-share Net asset
earnings distribution distribution distribution value per share
33% to 7.05% to 5% to 9.5% to 14.5% to
R332.3 million 172.176 cents 91.880 cents 80.296 cents 934 cents
per share per share per share
Portfolio value Portfolio value Acquisition Properties 20% reduction
inclusive of acquisitions at year end concluded during transferred in vacancies
subject to transfer 33% to year R2.2 billion during year from the
R6.6 billion R5.6 billion R1.2 billion interim period
CONDENSED CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION
Audited
Reviewed 31 August 2014
31 August 2015 Restated
R’000 R’000
ASSET
Non-current assets 5 562 466 4 165 368
Investment property 5 511 350 4 116 886
Fair value of property portfolio for accounting purposes 5 413 107 4 022 567
Straight-line rental income accrual 98 243 94 319
Goodwill 48 482 48 482
Property, plant and equipment 1 231 –
Derivative financial assets 1 403 –
Current assets 161 234 102 593
Trade and other receivables 98 188 70 575
Cash and cash equivalents 63 046 32 018
Non-current assets held for sale
Investment property held for sale 49 366 74 800
Total assets 5 773 066 4 342 761
EQUITY AND LIABILITIE
Equity 3 603 971 841 956
Stated capital 2 799 016 427 852
Fair value reserve 705 947 494 479
Retained income/(Accumulated loss) 99 008 (80 375)
Non-current liabilities 1 752 422 2 774 512
Debenture capital – 1 684 659
Interest-bearing liabilities 1 752 422 1 089 853
Current liabilities 416 673 726 293
Interest-bearing liabilities 288 822 506 667
Trade and other payables 127 851 88 313
Linked unitholders for distribution – 131 313
Total equity and liabilities 5 773 066 4 342 761
Number of A-shares in issue 192 987 583* 153 941 061*
Number of B-shares in issue 192 987 583* 156 021 763*
Net asset value per A-share (cents) 933.73 815.13
Net asset value per B-share (cents) 933.73 815.13
Loan to value (LTV) 36.7% 38.1%
CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
Audited
Reviewed 31 August 2014
31 August 2015 Restated
R’000 R’000
Revenue 729 109 598 294
Contractual rental income 578 550 461 036
Recoveries and other income 146 482 112 625
Straight-line rental income accrual 4 077 24 633
Property expenses (250 216) (199 062)
Net property income 478 893 399 232
Administration and corporate costs (25 789) (18 327)
Net operating profit 453 104 380 905
Net finance cost (269 644) (362 672)
Finance income 7 626 3 977
Finance cost (149 456) (121 888)
Debenture interest (127 814) (244 761)
Net profit after finance cost 183 460 18 233
Loss on sale of properties (1 665) –
Fair value adjustments 209 056 69 821
Investment properties and held for sale 211 730 94 454
Straight-line rental income accrual (4 077) (24 633)
Interest rate swaps 1 403 –
Profit before taxation 390 851 88 054
Taxation – –
Profit for the year after taxation 390 851 88 054
Other comprehensive income – –
Total comprehensive income for the year attributable to equity
holders 390 851 88 054
Reconciliation between earnings, headline earnings and
distributable earnings
Audited
Reviewed 31 August 2014
31 August 2015 Restated
R’000 R’000
Total profit and comprehensive income for the year 390 851 88 054
Debenture interest 127 814 244 761
Earnings 518 665 332 815
Adjustments: (205 988) (69 821)
Loss on sale of properties 1 665 –
Fair value – investment properties revaluation (211 730) (94 454)
Fair value – straight line rental income 4 077 24 633
Headline earnings 312 677 262 994
Adjustments: 19 602 (13 872)
Interest rate swaps (1 403) –
Amortisation of debt raising fee 2 187 888
Lease cancellation income distributed – 9 493
Antecedent interest 22 895 380
Straight-line rental income accrual (4 077) (24 633)
Distributable earnings 332 279 249 122
Total number of shares in issue* 385 975 166 309 962 824
Number of A-shares in issue 192 987 583 153 941 061
Number of B-shares in issue 192 987 583 156 021 763
Weighted average number of A-shares in issue* 178 765 274 153 798 028
Weighted average number of B-shares in issue* 179 705 865 155 850 228
* Net of treasury shares
Basic earnings per A-share (cents) 144.69 114.62
Basic earnings per B-share (cents) 144.69 100.44
Headline earnings per A-share (cents) 87.23 92.07
Headline earnings per B-share (cents) 87.23 77.89
Distribution per A-share 91.88014 87.50445
Interim 45.94007 43.75200
Final 45.94007 43.75245
Distribution per B-share 80.29606 73.33284
Interim 35.34590 32.33800
Final 44.95016 40.99484
Basic and headline earnings per share are based on the weighted average number of shares in issue during the year.
Following the conversion of the linked units to ordinary shares on 20 July 2015, linked units no longer exist.
The company does not have any dilutionary instruments in issue.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Retained
income/
Stated Fair value (Accumulated
capital reserve loss) Total equity
R’000 R’000 R’000 R’000
Balance at 31 August 2013 (Audited) 427 852 400 024 (73 974) 753 902
Total comprehensive income for the year – – 88 054 88 054
Transfer to fair value reserve – investment
properties – 94 455 (94 455) –
Balance at 31 August 2014 (Audited) 427 852 494 479 (80 375) 841 956
Total comprehensive income for the year – – 390 851 390 851
Capitalisation on cancellation of debentures 2 371 164 – – 2 371 164
Transfer to fair value reserve – investment
properties – 210 065 (210 065) –
Transfer to fair value reserve – interest rate swaps – 1 403 (1 403) –
Balance at 31 August 2015 (Reviewed) 2 799 016 705 947 99 008 3 603 971
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
Audited
Reviewed 31 August 2014
31 August 2015 Restated
R’000 R’000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 460 952 354 229
Net finance cost (141 830) (108 862)
Distribution paid (265 290) (230 080)
Net cash generated from operating activities 53 832 15 287
CASH OUTFLOWS FROM INVESTING ACTIVITIES (1 160 196) (346 837)
Issue of linked units 692 668 189 219
Interest-bearing liabilities raised 444 724 151 773
CASH INFLOWS FROM FINANCING ACTIVITIES 1 137 392 340 992
Net increase in cash and cash equivalents 31 028 9 442
Cash and cash equivalents at the beginning of the year 32 018 22 576
Cash and cash equivalents at the end of the year 63 046 32 018
CONDENSED CONSOLIDATED SEGMENTAL INFORMATIO
Total of
Retail Offices Industrial Land operating
segments
R’000 R’000 R’000 R’000 R’000
YEAR TO 31 AUGUST 2015 (REVIEWED)
Revenue from property portfolio 447 649 190 746 90 714 – 729 109
Property expenses (167 183) (54 440) (28 580) (13) (250 216)
Net property income 280 466 136 306 62 134 (13) 478 893
Investment property at fair value 3 411 227 1 190 703 896 670 12 750 5 511 350
Investment property held for sale 22 766 25 200 – 1 400 49 366
3 433 993 1 215 903 896 670 14 150 5 560 716
YEAR TO 31 AUGUST 2014 (Restated) (AUDITED)
Revenue from property portfolio 305 463 235 547 57 284 – 598 294
Property expenses (107 219) (71 587) (20 256) (199 062)
Net property income 198 244 163 960 37 028 – 399 232
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
2 488 624 1 193 077 497 235 12 750 4 191 686
The entity has four reportable segments based on the sectorial nature – these are the entity’s strategic business segments. For
each strategic business segment the entity’s executive directors review internal management reports on a monthly basis.
RECLASSIFICATION AND RESTATEMENT OF PRIOR YEAR
1. In line with industry practice municipal recoveries have been disclosed as revenue and the 2014 results restated.
Previously, municipal recoveries were shown net of municipal cost in the property expense line. The restatement
resulted in:
Restated Published Difference
2014 2014 2014
R’000 R’000 R’000
Extract of Statement of Comprehensive Income
Revenue 598 294 491 249 107 045
Contractual rental income 461 036 461 036 –
Recoveries and other income 112 625 5 580 107 045
Straight-line rental income accrual 24 633 24 633 –
Property expenses (199 062) (92 017) (107 045)
Net property income 399 232 399 232 –
2. A portion of the Group’s debt facilities allows for surplus cash to be deposited into the debt facility and withdrawn
on a demand basis when required. Previously, the funds that were deposited into these access debt facilities were
classified as cash and cash equivalents. This transaction does not comply with the cash and cash equivalent
definition in terms of IAS7 (statement of cash flows) and has now been reclassified from cash to interest-bearing
liabilities as follows:
Restated Published Difference
2014 2014 2014
R’000 R’000 R’000
Extract of Statement of Financial position
Current assets 102 593 131 349 (28 756)
Trade and other receivables 70 575 70 575 –
Cash and cash equivalents 32 018 60 774 (28 756)
Non-current liabilities 2 774 512 2 803 268 (28 756)
Debenture capital 1 684 659 1 684 659 –
Interest-bearing liabilities 1 089 853 1 118 609 (28 756)
The above restatements do not have any impact on earnings per share or headline earnings per share.
COMMENTARY
Profile
Dipula is a diversified REIT with outstanding BEE credentials, which owns a diversified R5.6 billion property portfolio,
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 shares are entitled to a 5% preferred income growth while DIBs
receive the remainder of the growth.
Distributable earnings
During the year ended 31 August 2015 ("the year") Dipula achieved an increase in distributable earnings of 33%
compared to the prior year, translating into a 7.05% growth in distributions per share over the preceding twelve
months and in line with management’s guidance of between 6.5% – 7.5% announced in the interim results.
The total distribution attributable to the A-share is 91.880 cents per share (2014: 87.504 cents per share), comprising
the 45.94007 cents per share declared at interims and the 45.94007 cents per share 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-shareholders.
The total dividend attributable to the B-shares is 80.296 cents per share (2014: 73.333 cents per share), which
includes 44.95016 cents per share (2014: 40.995 cents per share) for the final dividend, equating to an increase of
9.5% on the prior year.
Property portfolio
The portfolio consists of 177 investment properties valued at R5.6 billion with a total gross lettable area ("GLA") of
approximately 702 000m². During the year, properties to the value of R1.2 billion were transferred into the Fund. Post
year end Dipula acquired 80% in a R860 million property portfolio from the Moolman Group. This together with Gillwell
Mall will increase Dipula’s portfolio size to R6.6 billion when transferred by November 2015. The effective date for the
Moolman transaction was 1 August 2015. The property cost-to-income ratio remained in line with the prior year at
34.5% on a gross basis and 19.8% on a net basis.
The segmental and geographic breakdown of Dipula’s portfolio as at 31 August 2015 was as follows:
Sectoral profile by GLA (%)
Industrial 28%
Offices 17%
Retail 55%
Sectoral profile by revenue (%)
Industrial 13%
Offices 26%
Retail 61%
Average
Monthly
Gross
Dipula Lease Expiry Profile GLA (m²) Income (R)
Vacant 54 629
Un-lettable and underdevelopment 17 759
Expiring before 31 Aug 2016 205 623 15 892 603
Expiring before 31 Aug 2017 143 836 9 545 165
Expiring before 31 Aug 2018 98 222 7 630 956
Expiring before 31 Aug 2019 46 160 4 209 588
Expiring After 31 Aug 2019 136 425 10 487 920
702 653 47 766 232
Geographic profile by GLA (%) Geographic profile by revenue (%)
Eastern Cape 8% North West 3% Eastern Cape 5% North West 4%
Free State 3% Northern Cape 0% Free State 2% Northern Cape 0%
Gauteng 66% Western Cape 3% Gauteng 77% Western Cape 2%
Limpopo 8% KwaZulu-Natal 7% Limpopo 3% KwaZulu-Natal 5%
Mpumalanga 2% Mpumalanga 2%
Vacancies
Vacancies relative to the prior year reduced to 8% from 9%. Industrial vacancies closed at 7% (2014: 5%) and retail
vacancies were at 8% (2014: 7%). Office vacancies reduced by an impressive 56% from the prior year and is now
8% (2014: 19%).
Acquisitions
The Group acquired properties for an aggregate cost of R1.2 billion between 1 September 2014 and 31 August 2015.
Refurbishments and redevelopments
Refurbishments and upgrades at a cost of approximately R350 million will be undertaken over the next 12 to
18 months at an average yield of approximately 11%. These projects will be funded by a combination of debt and
equity. A total of R58.6 million was spent on redevelopments and capex during 2015.
Disposals
A total of 17 properties amounting to R92.2 million were sold during the year in line with the Group’s strategy of
disposing of non-core properties.
Subsequent events
Dipula has commitments for further property acquisitions of R1 billion which comprises 80% of the Moolman
portfolio and Gillwell Taxi Retail Park. These acquisitions will be funded by a combination of debt and equity.
Funding
As at 31 August 2015, the Group’s all-in blended interest rate is 8.12%. The Company has total debt facilities of
R2.38 billion, with R2.04 billion utilised to date.
67% of the drawn down debt has been fixed through a combination of interest rate swaps and fixed interest loans.
Dipula has successfully registered its R 2 billion Domestic Medium Term Note Programme with the JSE in November 2015.
Debt maturities profile
Facility Fixed Floating
R’000 % R’000 % R’000 %
FY 2016 336 530 14 189 506 8 147 024 6
FY 2017 275 000 12 125 000 5 150 000 6
FY 2018 1 024 905 43 244 456 11 780 449 33
FY 2019 146 401 6 123 601 5 22 800 1
FY 2020 594 654 25 – – 594 654 25
2 377 489 100 682 563 29 1 694 927 71
SWAP maturity profile
Maturity date R’000 Nominal rate
16 Jan 20 21 250 6.78
16 Jan 18 85 000 6.47
01 Dec 17 506 666 7.10
27 Oct 17 70 000 6.95
682 916
Prospects
Dipula has an acquisitions pipeline of approximately R1.5 billion for 2016. Further value will be unlocked in the
existing portfolio through extensions, conversions and revamps.
Entry into the residential sector is being actively pursued, subject to pricing and risk considerations and the
establishment of appropriate strategic partnerships.
Assuming that trading conditions and the macroeconomic environment remain stable and no further major tenant or
corporate defaults, the board expects growth in distributions of between 7% and 8% for the year ending 31 August
2016. This forecast has not been reviewed or reported on by the Group’s auditors.
Changes to the board of directors
With effect from 31 August 2015, shareholders were advised that Brigitte de Bruyn has resigned as the Financial
Director of Dipula to pursue new interests and that Ridwaan Asmal was appointed as Financial Director of Dipula
with effect from 1 September 2015. The board thanks Brigitte for her service to the Fund since listing, and wishes
Ridwaan everything of the best in his new role.
Payment of final dividend
The board has approved and notice is hereby given of the final dividend (dividend number 9) for the period
1 March 2015 to 31 August 2015 of 45.94007 cents per A-share and 44.95016 cents per B-share.
Dipula shareholders holding B-shares will be offered an election, in respect of all or part of their B-shareholding,
to re-invest the cash dividend of 44.95016 cents per B-share in return for B-shares (the "share re-investment
alternative"), failing which they will receive the cash dividend. By electing to participate in this share re-investment
alternative, B-shareholders will be able to increase their B-shareholding in Dipula without incurring dealing costs.
In turn, Dipula will benefit from an increase in the amount of shareholders’ funds available to support continued
growth. The share re-investment alternative will not be offered to A-shareholders, who will all receive the cash
dividend of 45.94007 cents per A-share.
Further details regarding the share re-investment alternative, including the manner in which the number of
B-shares to which a participating B-shareholder is entitled will be determined, will be set out in a circular to Dipula
B-shareholders to be issued on or about 12 November 2015, and will also be released on SENS.
The dividend is payable to Dipula shareholders in accordance with the timetable set out below:
Last day to trade cum dividend Friday, 27 November 2015
Securities trade ex dividend Monday, 30 November 2015
Record date Friday, 4 December 2015
Payment date Monday, 7 December 2015
Share certificates may not dematerialised or rematerialised between Monday, 30 November 2015 and Friday,
4 December 2015 both days inclusive.
In respect of dematerialised shareholders, the dividend will be transferred to the CSDP account/broker accounts
on Monday, 7 December 2015. Certificated shareholders’ dividend payments will be posted on or about Monday,
An announcement relating to the tax treatment will be released separately on SENS.
By order of the Board
Johannesburg
11 November 2015
Directors: ZJ Matlala* (Chairperson), IS Petersen (CEO), BH Azizollahoff*#, R Asmal (FD), NS Gumede, E Links*,
Y Waja*, SA Halliday*
* Independent non-executive, # British
Block B, Dunkeld Park, 6 North Road, Dunkeld West, Johannesburg, 2196
Tel: +2711 325 2112 website: http://www.dipula.co.za
BASIS OF PREPARATION AND ACCOUNTING POLICIES
These results were prepared by the Financial Director, Mr R Asmal assisted by Ms B de Bruyn (previous Financial
Director of Dipula).
The reviewed provisional condensed consolidated financial results for the year ended 31 August 2015 have been
prepared in accordance with the requirements of the JSE Listings Requirements for provisional reports and the
requirements of the Companies Act of South Africa. 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 the Financial Pronouncements as issued by the Financial Reporting Standards
Council and to also, as a minimum, contain the information required by IAS34 Interim Financial Reporting. The
accounting policies applied are consistent with those applied in the previous years consolidated annual financial
statements. The adoption of these standards did not have any material impact on the Group’s results.
Reviewed results for the year ended 31 August 2015
The results for the year ended 31 August 2015 have been reviewed by Deloitte & Touche, 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.
Shareholders are therefore advised that in order to obtain a full understanding of the nature of auditor’s engagement
they should obtain a copy of the auditor’s reviewed report together with the accompanying financial information from
the issuers registered office. The directors take full responsibility for the preparation of these provisional condensed
consolidated financial results.
Measurement of fair value
Investment property
In terms of the accounting policy, the portfolio is valued annually, with properties above R8 million being valued by
independent registered valuers. One third of the properties below R8 million (at the last valuation date) are valued
externally whilst the remaining two-thirds are valued internally by directors. The properties were valued using either
the discounted cash flow or capitalisation methods by the internal and external valuers. The valuations were done
on an open market basis with consideration given to the future earnings potential and applying an appropriate
capitalisation rate to a property. The capitalisation rates used ranged between 8.5% and 12%. Investment properties
held-for-sale were valued at the net sale price, which is considered to be the fair value.
Financial instruments
Financial instruments are measured at fair value including derivatives. The fair value of interest rate swaps is based
on broker quotes. Those quotes are tested for reasonableness by discounting estimated future cash flows based on
the terms and maturity of each contract and using market interest rates for a similar instrument at the reporting date.
Hierarchy levels
The fair value hierarchy reflects the significance of the inputs used in making fair value measurements. The level
within which the fair value measurement is categorised in its entirety shall be determined on the basis of the lowest
level input that is significant to the fair value measurement in its entirety.
The different levels have been defined as follows:
– Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities;
– Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either
directly or indirectly;
– Level 3: Inputs for assets or liabilities that are not based on observable market data.
Investment properties and derivative financial instruments have been categorised as Level 3 and 2 respectively.
There has been no material change between levels during the year.
Fair value measurements for investment properties categorised as Level 3: R’000
Balance at beginning of year 4 116 886
Acquisitions/additions 1 250 178
Property sold (22 874)
Loss on sale of property (1 665)
Transferred to non-current assets held for sale (46 850)
Change in fair value 215 807
Depreciation (132)
Balance at end of year 5 511 350
Valuation technique and significant unobservable inputs
Inter-relationship between key
Significant unobservable unobservable inputs and fair
Valuation technique inputs value measurement
Discounted cash flows: The valuation model
considers the present value of net cash – Expected rental growth The estimated fair value would
flows to be generated from the property varies between 6% to 8% increase/(decrease) if:
taking into account expected rental and per annum;
capitalisation rates. The expected net cash – Expected rentals were higher/
flows are discounted using risk-adjusted – Risk-adjusted discount – (lower);
discount rates. Among other factors, the rates varies between 14% – Risk-adjusted discount rates
werediscount rate estimation considers the and 16%. and capitalisation rates
quality of the property, its location and lease – Capitalisation – rates vary lower/(higher).
terms. between 8.5% to 12%.
Capitalisation model – establishes the
market related rental income for the property
and applies an appropriate capitalisation
rate.
www.dipula.co.za
Date: 11/11/2015 12:08:00 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
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