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DELTA PROPERTY FUND LIMITED - Reviewed provisional condensed consolidated results for the year ended 28 February 2018

Release Date: 04/06/2018 07:30
Code(s): DLT     PDF:  
Wrap Text
Reviewed provisional condensed consolidated results for the year ended 28 February 2018

Delta Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2002/005129/06)
Share code: DLT  ISIN: ZAE000194049
("Delta" or "the Fund" or "the Group")
(REIT status approved)

Reviewed provisional condensed consolidated results for the year ended 28 February 2018

Highlights
- Full year distribution of 97.24 cents per share
- Successfully refinanced R941 million in debt
- Renewed and concluded 146 918m2 of leases
- Third consecutive year reduction in gearing to 41.3%
- Maintained level 2 B-BBEE rating with new sector code
- Concluded stage 1 for 227 550m2 bulk lease renewal

Commentary
Company profile
Delta is a JSE listed Real Estate Investment Trust ("REIT") with a property portfolio of R11.5 billion 
and a market capitalisation of R4.3 billion as at 28 February 2018. The Fund is black managed and is 
one of the highest empowered funds in the sector with a level 2 contributor B-BBEE recognition level, 
maintaining its status as the dominant sovereign listed property fund in South Africa. The primary 
focus of the Fund is long-term investment in quality, rental income-generating properties situated 
in strategic nodes attractive to sovereign entities and other tenants requiring empowered landlords.

Financial results
Delta's Board has declared a 2.1% increase in full year distribution of R691.6 million. This represents 
flat growth of 97.24 cents per share.

Rental income decreased by 3.1% mainly due to disposals, with like-for-like income growth of 5.2%. 
The gross cost to income ratio and net cost to income ratio decreased to 26.5% and 12.1% respectively, 
due primarily to municipal adjustments and credits received. Net operating profit, benefiting from 
higher tenant reinstatement income and stricter cost management, increased by 2%.

Administrative expenses for the period decreased by 21.8%, largely affected by the reallocation of 
expenses to property operating expenses. On a normalised basis, administrative expenses decreased by 
2.3% due to stricter cost management initiatives. 

Independent valuers revalued the underlying property portfolio, resulting in a 2.3% growth in fair 
value to R11.5 billion. Fair value adjustments of R104.8 million represent the movement between the 
net fair value gain on investment property of R146.6 million and loss on disposal of the investment 
in joint venture Baystone Holdings of R41.6 million. 

Finance costs increased by 2.5%, due to higher weighted average interest rate of 9.5% on facilities 
renewed together with increased debt structuring fees amortised. Interest income decreased by 27.5% 
due to loss of income on cash guarantee released upon disposal of the investment in Baystone Holdings. 

The share of profit from associate Grit Real Estate Income Group ("GRIT") increased to R44.0 million, 
resulting in a full year US dollar translated dividend of R35.7 million being received. Delta's 11.5%  
shareholding in GRIT was impaired by R21.9 million, as the carrying value of the investment exceeded 
the fair market value at 28 February 2018. 

Property portfolio
Delta's R11.5 billion portfolio comprises 105 properties (total GLA of 952 428m2), which includes 
assets held-for-sale of 11 properties (total GLA of 90 131m2) with a value of R972.6 million.

The segmental and geographic breakdown of the portfolio (per tenant) at the reporting date was 
as follows:

Tenant profile
Detailed tenant breakdown - GLA (%)     Detailed tenant breakdown - revenue (%)
National government      33.7%          National government      37.5%
Provincial government    14.1%          Provincial government    21.6%
State-owned enterprise   10.6%          State-owned enterprise   11.8%     
Local government         5.8%           Local government         6.9%
Office - other           14.5%          Office - other           12.8%
Vacant                   11.8%          Retail                   7.5%
Retail                   6.1%           Industrial               1.9%  
Industrial               3.4%

Geographic profile
Geographic profile - GLA (%)            Geographic profile - rental (%)           
Gauteng                  42.5%          Gauteng                  44.2%         
KwaZulu-Natal            29.2%          KwaZulu-Natal            24.6%         
Free State               9.0%           Limpopo                  9.3%         
Limpopo                  4.7%           Free State               6.6%         
Western Cape             4.4%           Western Cape             5.3%         
Northern Cape            3.9%           Northern Cape            3.7%         
Mpumalanga               3.2%           Eastern Cape             3.0%         
Eastern Cape             2.5%           Mpumalanga               2.8%         
North West               0.6%           North West               0.5%         

Acquisitions
Delta did not embark on any acquisitions during the current year, but rather focused inwardly on 
reducing vacancies and renewing leases on previously acquired assets. A pipeline of assets has been 
identified for acquisition pending the proposed recapitalisation B-BBEE consortium transaction.

Major capital projects
Capital investment remains a high priority to ensure the supply of quality assets that meet tenants' 
requirements. The following major capital projects were either recently completed, are in progress 
or are close to completion:
- 88 Field Street (Durban) - completed at an estimated cost of R89 million.
- Sleepy Hollow (PMB) - completed at an estimated cost of R4.5 million. 
- Embassy Building (Durban) - nearing completion October 2018 at an estimated cost of R28 million 
  and is strategic to securing future leases. 
- Beacon Hill (King Williams Town) - investment of R40 million due to a five-year lease. 
- Commission House (Pretoria) - nearing completion June 2018 at an estimated cost of R12 million with 
  negotiations for a 10-year lease extension in progress. 
- 17 Harrison Street Building and Kay Street Parkade (Johannesburg) - nearing completion May 2018 at 
  an estimated cost of R4.5 million due to a four-year lease renewal. 

Disposals
During the 2018 financial year, Delta disposed of seven buildings for a total consideration of 
R316 million with a total GLA of 35 403m2. These buildings were Samora House, Damelin House, 
Presidia, 1 and 3 Ferreira, 14 New Street and Edcon Building. An additional four buildings, 
namely Block G, Broadcast House, 12 New Street and Top trailers 1 have binding sale agreements 
as at year-end, totalling a GLA of 31 035m2 and a fair value of R328.5 million. Transfer of 
these four buildings is imminent. 

Letting and vacancies
The lease expiry profile of the portfolio at 28 February 2018 was as follows:
                                                                                                    Beyond     
                                        February   February   February   February   February   28 February     
Segment             Vacant    Monthly       2019       2020       2021       2022       2023          2023    
Office sovereign      7.2%      20.2%      31.4%      11.8%      19.8%       6.3%       0.7%          2.5%    
Office other         23.0%      10.2%      25.1%      14.8%      17.5%       3.5%       3.9%          2.0%    
Retail                3.1%       0.8%      13.4%      14.4%       3.2%       8.3%       0.0%         56.7%    
Industrial           19.0%      14.2%      27.8%       0.0%      39.1%       0.0%       0.0%          0.0%    

Vacancies increased to 11.8% (total GLA of 112 225m2), mainly due to challenges in the Free State 
Provincial portfolio and the ex-Eskom Sunninghill portfolio. The weighted average in-force escalation 
at year end is 6.0%, with a weighted average rental of R110.58/m2. Lease renewals of 93 144m2 and new 
leases of 53 774m2 were concluded during the year. 

Delta concluded successful meetings with the National Department of Public Works ("DPW") negotiating 
team on proposed terms and rental, resulting in the approval of 59 leases with a total GLA of 227 550m2 
progressing to stage 2 and stage 3 of the finalisation process for renewal. The DPW is currently 
engaging user departments to confirm budgets and tenant requirements for their approval (stage 2) 
before the National Bid Adjudication Committee ("NBAC") finalises (stage 3) and recommends the signing 
of the leases, expected to be finalised by 31 December 2018. 

The recent cabinet reshuffle has brought back to Public Works Minister Thulas Nxesi who was instrumental 
in the DPW and Property Management Trading Entity ("PMTE") formation, conceptualising the turnaround 
strategy and leasing policy. We firmly believe that the Minister together with DPW's current management 
team will be in a position to finalise the lease renewals and move PMTE forward. 

Funding
LTV improved to 41.3% (2017: 41.5%), benefiting from the upward fair value adjustment to investment 
property but negatively impacted by the reduction in the market value of our investment in GRIT to 
R381.9 million (2017: R429.6 million). 

Bank facilities totalling R941 million were refinanced at a blended margin of 2.6% above the three-month 
Jibar reference rate, and a R125 million commercial paper was settled during the year.

The weighted average all-in cost of funding is 9.2% (2017: 9.2%), with 85.4% (2017: 84.1%) of borrowings 
being fixed through a combination of swap contracts and fixed rate loans for an average period of 
1.5 years (2017: 2.2 years). The average debt facility expiry period is 1.5 years (2017: 1.9 years) 
with the interest cover ratio at 2.4 (2017: 2.5). 

The debt expiry period is directly linked to the lease term; hence, the intention is to term out the 
debt expiry profile once the bulk lease renewals are concluded. We expect the disposal of assets 
held-for-sale and conclusion of the bulk lease renewal during the 2019 financial year to have a 
significant positive impact on the gearing of the fund.

Provision of financial assistance
Delta shareholders are referred to special resolution number 4 relating to the provision of 
direct or indirect financial assistance in terms of section 45 of the Companies Act, No 71 
of 2008 ("the Companies Act") to related or inter-related companies, which was approved at the 
Annual General Meeting of Delta on 21 September 2017.

Further to the above, Delta shareholders are notified in terms of section 45(5)(a) of the Companies 
Act, that the Board of directors of the Company ("the Board") passed a resolution on 29 May 2018 
("the Board resolution") granting financial assistance to the following related companies:
- Somnipoint Proprietary Limited - R32.7 million in respect of a loan to a company with common directors.
- Delta Property Asset Management Proprietary Limited - R16.7 million in respect of a loan to a 
  company with common directors.
- GRIT Real Estate Income Group Limited - R5.6 million in respect of a guarantee fee charged.
- Hestitrix Proprietary Limited - R249.2 million in the ordinary course of business.
- K2014000273 Proprietary Limited - R153.8 million in the ordinary course of business.
- 277 Vermeulen Street Properties Proprietary Limited - R20.2 million in the ordinary course of business.
- Hendisa Investments Proprietary Limited - R33 614 in the ordinary course of business.

The financial assistance provided, as detailed above, is greater than one-tenth of 1% of Delta's net 
worth as at the date of the Board resolution. The Board further confirms that immediately after 
providing the financial assistance, the Company continues to satisfy the solvency and liquidity 
test as contemplated in section 4 of the Companies Act and that the terms and conditions of the 
financial assistance are fair and reasonable to the Company.

Changes to directorate during the period
During the reporting period, the Board was further bolstered with the appointment of Mr JJ Njeke 
and Mr Caswell Rampheri as independent non-executive directors. Both gentlemen bring significant 
property experience to the Board. 

Mr Andrew Konig stepped down as non-executive director following the disposal of Redefine's 
shareholding in Delta to a black women-led empowerment group, which included Ms Nooraya Khan. 
The Board thanks Andrew for his contributions during his tenure. Following the transaction, 
Nooraya stepped down as lead independent director but remains on the Board as non-executive 
director. 

Mr JJ Njeke was subsequently appointed as lead independent director and Chairman of the Audit, 
Risk and Compliance Committee. Post the reporting date, Ms Bronwyn Corbett resigned as 
independent non-executive director to focus full time on her role as Chief Executive Officer 
of Grit. We thank Bronwyn for her valuable contributions over the years and wish her the very best.

Prospects
The South African Reserve Bank's recently released Financial Stability Review, concluded that 
South Africa's financial sector is strong and stable and continues to feed off positive business 
and consumer sentiment, in spite of global uncertainties, monetary policy normalisation and 
protectionist measures. The general euphoria that spurred consumer and business confidence has 
been aided by the positive confidence levels, ongoing household balance sheet recovery and the 
aversion of a Moody's sovereign ratings downgrade. This increased confidence has seen a warming 
of real estate investors' sentiment to dominant domestic focused listed REITs.

Delta continues to focus on property fundamentals by renewing leases, reducing vacancies, 
refinancing debt at market related rates and investing in both defensive and accretive capital 
in its property portfolio. This consolidated effort will translate into a healthier balance 
sheet with opportunities for growth. Efforts to recapitalise the business are underway and 
the proposed transaction with the empowerment consortium, once successfully concluded, will 
inject much needed capital into the business and achieve significant direct black ownership 
of Delta.

In the lead-up to the 2019 national elections, the Board expects that the domestic-focused 
listed property market will continue to face headwinds, with perceptions around sovereign 
underpinned funds being driven by increased political rhetoric and positioning. The Board 
and management remain committed to Delta's sovereign strategy despite the current
challenging and tough trading climate. 

The Board anticipates earnings to decrease by between 2% and 4% for the 2019 financial year 
primarily due to once-off lease adjustments being traded off for longer-term leases (DPW bulk 
lease renewal), disposal of assets held-for-sale and issue of shares for acquisition of the 
Free State portfolio. The Group's independent auditors have not reviewed nor reported on this 
forecast. 

Declaration of final dividend ("the cash dividend") with the election to reinvest the dividend 
Shareholders are advised that dividend number 11 of 50.84210 cents per share for the year ended 
28 February 2018 has been declared. The source of the cash dividend is from distributable income. 

Shareholders will be entitled, in respect of all or part of their shareholding, to elect to 
reinvest the cash dividend in return for Delta shares ("the dividend reinvestment alternative"), 
failing which they will receive the cash dividend in respect of all or part of their shareholding. 
The number of Delta shares to which shareholders are entitled will be determined with reference 
to the ratio that 50.84210 cents per Delta share bears to the ratio price, being the five-day 
volume weighted average traded price (cum dividend) of Delta shares on the JSE prior to the 
finalisation date, which will be no later than Tuesday, 19 June 2018.

The Board of directors of Delta, at its discretion, may withdraw the dividend reinvestment 
alternative should market conditions warrant such action and such withdrawal will be 
communicated to shareholders prior to the finalisation announcement to be published no 
later than 11:00 on Tuesday, 19 2018.

Salient dates of the cash dividend and the dividend reinvestment alternative:
                                                                             2018    
Declaration date of cash dividend and dividend               
reinvestment alternative                                           Monday, 4 June    
Circular and form of election posted to                      
Delta shareholders                                              Wednesday, 6 June    
Announcement of dividend reinvestment alternative            
ratio (including ratio price) and finalisation               
information ( finalisation date”) released on                
SENS by 11:00                                                    Tuesday, 19 June    
Last day to trade in order to be eligible for the            
cash dividend and dividend reinvestment alternative              Tuesday, 26 June    
Delta Shares commence trading ex cash dividend and dividend  
reinvestment alternative                                       Wednesday, 27 June    
Last day to elect to receive the dividend reinvestment       
alternative (no late forms of election will be accepted)     
by 12:00                                                          Friday, 29 June    
Listing of maximum possible number of Delta shares in        
respect of the dividend reinvestment alternative             
commences on the JSE                                              Friday, 29 June    
Record date of cash dividend and dividend                    
reinvestment alternative                                          Friday, 29 June    
Announcement of results of cash dividend and                 
dividend reinvestment alternative on SENS                          Monday, 2 July    
Cheques posted to certificated shareholders and accounts     
credited by CSDP or broker to dematerialised shareholders    
electing the cash dividend on                                      Monday, 2 July    
Announcement of results of cash dividend and dividend 
reinvestment alternative in the press                             Tuesday, 3 July    
Share certificates posted to certificated shareholders 
and accounts credited by CSDP or broker to 
dematerialised shareholders electing the dividend 
reinvestment alternative on                                     Wednesday, 4 July    
Adjustment to Delta shares listed on or about                    Thursday, 5 July    

Notes:
1. All dates and times indicated are South African dates and times.
2. All dates and times are subject to change. Any change will be announced on SENS.
3. Delta shares may not be dematerialised or rematerialised between commencement of trade on 
   Wednesday, 27 June 2018 and the close of trade on Friday, 29 June 2018, both dates included.
4. Shareholders electing the dividend reinvestment alternative should note that settlement of 
   the Delta Shares will occur three business days after the record date, which differs from the 
   conventional one business day after the record date settlement process.

Tax implications
In accordance with Delta's REIT status, shareholders are advised that the cash dividend meets the 
requirements of a "qualifying distribution" for the purposes of section 25BB of the Income Tax 
Act, No. 58 of 1962 ("Income Tax Act"). An announcement informing shareholders of the tax treatment 
of the distributions will be released separately on SENS.

Basis of preparation and accounting policies
The condensed consolidated financial statements have been prepared in accordance with the 
International Financial Reporting Standards ("IFRS"), IAS 34 Interim Financial Reporting, 
the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and 
Financial Pronouncements as issued by the Financial Reporting Standards Council, the JSE 
Listings Requirements and the requirements of the Companies Act of South Africa. The 
accounting policies applied in the preparation of these interim results are in terms of 
IFRS and are consistent with those applied in the previous annual financial statements.

The condensed consolidated financial statements have been prepared under the supervision 
of the Chief Financial Officer, Mr Shaneel Maharaj, CA(SA)/HDipTax, and have been reviewed 
by BDO South Africa Incorporated, who expressed an unmodified 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 auditors' 
report does not necessarily cover all the information contained in this announcement. 
Shareholders are therefore advised that in order to obtain a full understanding of the 
nature of the auditors' work they should obtain a copy of that report together with the 
accompanying financial information from the registered office of the Company.

The directors take full responsibility for the preparation of the provisional report and 
the financial information has been correctly extracted from the underlying financial 
statements. Delta has complied with IFRS and JSE Listings Requirements by disclosing 
earnings and headline earnings per share. Distribution per share has been disclosed 
additionally.

By order of the Board

JB Magwaza             SH Nomvete
(Chairman)            (Chief Executive Officer)

31 May 2018


Condensed consolidated statement of financial position
as at 28 February 2018
                                                               Group                          Company                    
                                                        2018            2017            2018            2017    
                                                       R'000           R'000           R'000           R'000    
Assets                                                                                                          
Non-current assets                                                                                          
Investment property                               10 535 000      10 053 921      10 268 200       9 793 123    
Fair value of investment property                 10 342 418       9 861 449      10 076 207       9 600 791    
Straight-line rental income accrual                  192 582         192 472         191 993         192 332    
Property, plant and equipment                          2 557           3 302           2 557           3 302    
Investment in subsidiaries                                 -               -          62 273          62 273    
Investment in joint venture                                -               -               -               2    
Investment in associate                              381 868         391 013         381 868         429 587    
Loans due from subsidiaries                                -               -         423 268         405 152    
Derivative financial instruments                           -              35               -              35    
                                                  10 919 425      10 448 271      11 138 166      10 693 474    
Current assets                                                                                                  
Loans due from related parties                        55 243         108 483          55 243         108 483    
Loan receivable                                       48 465               -          48 465               -    
Current tax receivable                                   526           1 153               -               -    
Trade and other receivables                          338 845         276 091         302 985         256 400    
Derivative financial instruments                           -           1 721               -           1 721    
Cash and cash equivalents                            100 177         196 115          96 864         194 372    
                                                     543 256         583 563         503 557         560 976    
Non-current assets held-for-sale                     972 600       1 327 500         744 600       1 101 700    
Total assets                                      12 435 281      12 359 334      12 386 323      12 356 150    
Equity                                                                                                          
Share capital                                      4 854 032       4 845 248       4 854 032       4 845 248    
Reserves                                             144 230         139 779         139 425         139 425    
Retained income                                    2 160 330       2 056 589       2 117 907       2 056 438    
Total equity                                       7 158 592       7 041 616       7 111 364       7 041 111    
Liabilities                                                                                                     
Non-current liabilities                                                                                     
Derivative financial instruments                      31 475          29 623          31 475          29 623    
Interest-bearing borrowings                        2 688 755       4 112 646       2 688 755       4 112 646    
Loans due to subsidiaries                                  -               -           4 190           4 190    
                                                   2 720 230       4 142 269       2 724 420       4 146 459    
Current liabilities                                                                                             
Interest-bearing borrowings                        2 263 935         986 581       2 263 935         986 581    
Trade and other payables                             183 983         121 823         177 453         114 954    
Derivative financial instruments                      11 426          23 768          11 426          23 768    
Bank overdraft                                        97 115          43 277          97 725          43 277    
                                                   2 556 459       1 175 449       2 550 539       1 168 580    
Total liabilities                                  5 276 689       5 317 718       5 274 959       5 315 039    
Total equity and liabilities                      12 435 281      12 359 334      12 386 323      12 356 150    
                                               
Statement of profit or loss and other comprehensive income
for the year ended 28 February 2018
                                                               Group                          Company                    
                                                        2018            2017            2018            2017    
                                                       R'000           R'000           R'000           R'000    
Revenue                                                                                                        
Rental income                                      1 562 033       1 612 481       1 505 471       1 557 344    
Straight-line rental income accrual                    2 020           4 863           1 134           4 432    
                                                   1 564 053       1 617 344       1 506 605       1 561 776    
Property operating expenses                         (414 168)       (464 003)       (406 068)       (455 703)   
Net property rental and related income             1 149 885       1 153 341       1 100 537       1 106 073    
Other income                                          20 287           6 215          20 278           6 027    
Dividend income                                            -               -          50 812          80 798    
Gain on foreign exchange differences                  16 881          20 336          16 881          20 336    
Administration expenses                              (53 329)        (68 169)        (52 838)        (66 649)   
Net operating profit                               1 133 724       1 111 723       1 135 670       1 146 585    
Fair value adjustments                               104 759         (34 887)         99 975         (49 904)   
Profit from operations                             1 238 483       1 076 836       1 235 645       1 096 681    
Finance costs                                       (482 179)       (470 580)       (482 624)       (470 578)   
Interest income                                       19 696          27 168          50 497          54 930    
Share of profit in associate                          43 970           1 526               -               -    
Impairment of investment in associate                (21 900)              -         (47 719)        (80 586)   
Profit before taxation                               798 070         634 950         755 799         600 447    
Taxation                                                   -               -               -               -    
Profit for the year                                  798 070         634 950         755 799         600 447    
Other comprehensive income:                                                                                     
Items that may be reclassified                                                                  
subsequently to profit and loss                                                                 
Share of foreign currency translation                                                           
reserve of associate                                   4 451          44 150               -               -    
Total comprehensive income for the year              802 521         679 100         755 799         600 447    
Profit for the year attributable to:                                                                            
Owners of the parent                                 798 070         634 950         755 799         600 447    
Total comprehensive income attributable to:                                                                     
Owners of the parent                                 802 521         679 100         755 799         600 447    
Basic and diluted earnings per share (cents)          112.26           89.49               -               -    
                                                                                 
                                                               
Condensed consolidated statement of changes in equity
for the year ended 28 February 2018
                                                 Foreign                                                         
                                                currency     Deferred                                            
                                     Share   translation         con-       Total     Retained         Total     
                                   capital       reserve   sideration    reserves       income        equity    
                                     R'000         R'000        R'000       R'000        R'000         R'000    
Group                                                                                                           
Balance at 1 March 2016          3 450 593       (43 796)     259 720     215 924    1 990 112     5 656 629    
Total comprehensive income                                                                        
for the year                             -        44 150            -      44 150      634 950       679 100    
Profit for the year                      -             -            -           -      634 950       634 950    
Other comprehensive income               -        44 150            -      44 150            -        44 150    
Issue of shares - issued as                                                                       
consideration                                                                                     
for investment property          1 255 834             -            -           -            -     1 255 834    
Capital issue expenses                (604)            -            -           -            -          (604)   
Deferred consideration settled                                                                    
- issue of shares                  139 425             -     (139 425)   (139 425)           -             -    
Deferred consideration raised            -             -       19 130      19 130            -        19 130    
Distributions paid                       -             -            -           -     (568 473)     (568 473)   
Balance at 1 March 2017          4 845 248           354      139 425     139 779    2 056 589     7 041 616    
Total comprehensive income                                                                        
for the year                             -         4 451            -       4 451      798 070       802 521    
Profit for the year                      -             -            -           -      798 070       798 070    
Other comprehensive income               -         4 451            -       4 451            -         4 451    
Distribution reinvestment            8 784             -            -           -            -         8 784    
Distributions paid                       -             -            -           -     (694 329)     (694 329)   
Balance at 28 February 2018      4 854 032         4 805      139 425     144 230    2 160 330     7 158 592    
Company                                                                                                         
Balance at 1 March 2016          3 450 593             -      259 720     259 720    2 024 464     5 734 777    
Total comprehensive income                                                                        
for the year                             -             -            -           -      600 447       600 447    
Profit for the year                      -             -            -           -      600 447       600 447    
Other comprehensive income               -             -            -           -            -             -    
Issue of shares - issued as                                                                       
consideration                                                                                     
for investment property          1 255 834             -            -           -            -     1 255 834    
Capital issue expenses                (604)            -            -           -            -          (604)   
Deferred consideration settled                                                                    
- issue of shares                  139 425             -     (139 425)   (139 425)           -             -    
Deferred consideration raised            -             -       19 130      19 130            -        19 130    
Distributions paid                       -             -            -           -     (568 473)     (568 473)   
Balance at 1 March 2017          4 845 248             -      139 425     139 425    2 056 438     7 041 111    
Total comprehensive income                                                                        
for the year                             -             -            -           -      755 799       755 799    
Profit for the year                      -             -            -           -      755 799       755 799    
Other comprehensive income               -             -            -           -            -             -    
Distribution reinvestment            8 784             -            -           -            -         8 784    
Distributions paid                       -             -            -           -     (694 329)     (694 329)   
Balance at 28 February 2018      4 854 032             -      139 425     139 425    2 117 907     7 111 364    
                                           
                                           
Condensed consolidated statement of cash flows
for the year ended 28 February 2018
                                                               Group                          Company       
                                                        2018            2017            2018            2017  
                                                       R'000           R'000           R'000           R'000    
Cash generated from operations                     1 132 324       1 016 482       1 100 863         967 411    
Interest received                                     12 158           7 823          42 504          35 584    
Dividend received                                     18 587          18 851          33 733          60 159    
Finance costs                                       (475 899)       (482 090)       (475 899)       (482 090)   
Taxation refund                                          627               -               -               -    
Dividends paid                                      (694 329)       (568 473)       (694 329)       (568 473)   
Net cash from operating activities                    (6 532)         (7 407)          6 872          12 591    
Acquisition of property, plant and equipment            (498)           (260)           (498)           (260)   
Acquisition of investment property                         -         (60 300)              -         (60 300)   
Capital expenditure on investment                                                                 
property and assets held-for-sale                   (185 436)       (202 965)       (182 905)       (196 217)   
Proceeds on disposal of assets held-for-sale         205 200         268 500         205 200         268 500    
Gross movement in loans with related parties          26 223          18 634          26 223          18 634    
Increase in loan receivable                          (48 465)              -         (48 465)              -    
Loans advanced to subsidiaries                             -               -         (18 115)        (27 543)   
Net cash from investing activities                    (2 976)         23 609         (18 560)          2 814    
Distribution reinvestment                              8 784               -           8 784               -    
Capital issue expenses                                     -            (604)              -            (604)   
Increase in interest-bearing borrowings              220 358         418 800         220 358         418 800    
Repayment of interest-bearing borrowings            (360 385)       (387 313)       (360 385)       (387 313)   
Repayment of other financial liabilities              (9 025)              -          (9 025)              -    
Net cash from financing activities                  (140 268)         30 883        (140 268)         30 883    
Net movement in cash and cash equivalents           (149 776)         47 085        (151 956)         46 288    
Cash at the beginning of the year                    152 838         105 753         151 095         104 807    
Total cash at the end of the year                      3 062         152 838            (861)        151 095    
                                                                                                  

Reconciliation of earnings, headline earnings and distributable earnings
for the year ended 28 February 2018
                                                                                              Group
                                                                                        2018            2017    
                                                                                       R'000           R'000    
Earnings, headline earnings and distributable earnings                                                          
Profit for the year                                                                  798 070         634 950    
Fair value adjustment to investment properties                                      (148 562)        103 922    
  Change in fair value of Delta's investment properties                             (146 611)         43 817    
  Change in fair value of associate's investment properties                           (1 951)         60 105    
Headline earnings                                                                    649 508         738 872    
Fair value adjustment to financial instruments                       
(net of deferred taxation)                                                               290          (8 930)   
  Change in fair value of financial instrument                                           290          (8 930)   
  Deferred taxation                                                                        -               -    
Fair value adjustment to investment in joint venture                 
(net of deferred taxation)                                                            41 562               -    
  Fair value adjustment on disposal of Baystone                                       41 562               -    
  Deferred taxation                                                                        -               -    
Straight-line rental income accrual (net of deferred taxation)                        (2 020)         (4 863)   
  Straight-line rental income accrual                                                 (2 020)         (4 863)   
  Deferred taxation                                                                        -               -    
Antecedent distribution                                                                  257               -    
Unrealised foreign exchange gain                                                     (16 881)        (20 336)   
Dividend income from associate                                                        35 666          37 990    
Share of profit in associate                                                         (43 970)         (1 526)   
Change in fair value of associate's investment properties                              1 951         (60 105)   
Impairment of investment in associate                                                 21 900               -    
Prior year retained earnings distributed                                               3 378               -    
Distributable earnings attributable to owners of the parent                          691 641         681 102    
Less: distribution declared                                                          691 641         677 724    
  Interim                                                                            329 724         313 119    
  Final (declared after 28 February 2018)                                            361 917         364 605    
Distributable earnings retained                                                            -           3 378    
Weighted average number of shares in issue                                                                      
In issue at the beginning of the year                                            710 632 182     533 097 436    
Shares issued                                                                              -     160 941 759    
Distribution reinvestment                                                            295 603               -    
Deferred consideration shares allocated                                                    -      15 491 667    
Weighted average number of shares in issue                                       710 927 785     709 530 862    
Actual number of shares in issue                                                                                
Number of shares in issue at interim                                             710 632 182     681 722 806    
Number of shares in issue at year-end                                            711 844 486     710 632 182    
Basic and diluted earnings and headline earnings                     
per share (cents)                                                    
Basic and diluted earnings per share                                                  112.26           89.49    
Basic and diluted headline earnings per share                                          91.36          104.14    
Distribution per share (cents)                                                                                  
Interim                                                                                46.40           45.93    
Final (declared after 28 February 2018)                                                50.84           51.31    
Distribution per share declared for the full year                                      97.24           97.24    
The Fund has no dilutionary instruments in issue.                                                               


Condensed consolidated segmental analysis
for the year ended 28 February 2018
                                                                                             Admin-                  
                                                                                      istration and                  
                                                    Office      Office                    corporate                  
                                        Retail  government       other   Industrial           costs        Total    
                                         R'000       R'000       R'000        R'000           R'000        R'000    
Group 2018                                                                                                          
Rental income                           38 544   1 138 261     358 925       26 303               -    1 562 033    
Straight line rental                                                                 
income accrual                           4 091      (4 463)      3 620       (1 228)              -        2 020    
Property operating expenses            (13 800)   (254 560)   (139 131)      (6 677)              -     (414 168)   
Net property rental and                                                              
related income                          28 835     879 238     223 414       18 398               -    1 149 885    
Fair value adjustment to                                                             
investment properties                   35 781     346 503     (87 379)     (30 379)       (117 915)     146 611    
Fair value adjustment to                                                             
investment in joint venture disposed         -           -           -            -         (41 562)     (41 562)   
Fair value adjustment to                                                             
derivative financial instruments             -           -           -            -            (290)        (290)   
Assets                                                                                                              
Fair value of investment property      318 572   7 431 687   2 592 159            -               -   10 342 418    
Straight-line rental income accrual     11 428     158 613      22 541            -               -      192 582    
Non-current assets held-for-sale             -     593 400     192 400      186 800               -      972 600    
Other assets                            30 252     174 895     119 752        3 856         598 926      927 681    
                                       360 252   8 358 595   2 926 852      190 656         598 926   12 435 281    
Liabilities                                                                                                         
Total liabilities                      187 411   4 696 358   1 947 170      105 236      (1 659 486)   5 276 689   
Group 2017                                                                                                          
Contractual rental income               71 198   1 302 985     216 403       21 895               -    1 612 481    
Straight line rental income accrual     (2 001)      6 829        (278)         312               -        4 863    
Property operating expenses            (27 823)   (352 429)    (76 792)      (6 959)              -     (464 003)   
Net property rental and                                                              
related income                          41 374     957 386     139 333       15 248               -    1 153 341    
Fair value adjustment to                                                             
investment properties                   40 239      33 874     (74 826)       9 548         (52 652)     (43 817)   
Fair value adjustment to derivative                                                  
financial instruments                        -           -           -            -           8 930        8 930    
Assets                                                                                                              
Fair value of investment property      439 242   8 185 019   1 237 188            -               -    9 861 449    
Straight-line rental income              9 295     172 693      10 484            -               -      192 472    
Non-current assets held-for-sale             -     900 400     269 100      158 000               -    1 327 500    
Other assets                            23 650     301 417     (64 757)       1 243         712 947      974 500    
Total assets                           472 187   9 559 529   1 452 015      159 243         712 947   12 355 921    
Liabilities                                                                                                         
Total liabilities                      339 641      73 382      15 244        1 632       4 887 819    5 317 718    

The segmental report has been populated based on a per building classification which is in accordance 
with the majority tenant.

Corporate information

Directors
JB Magwaza^ (Chairman), SH Nomvete* (CEO), S Maharaj* (CFO), ON Tshabalala* (COO), N Khan~, DN Motau^, 
ID Macleod^, MJN Njeke ^#, NN Afolayan^, MCR Rampheri^
^Independent non-executive; *Executive; ~Non-executive; #Lead independent director 

Registered office
Silver Stream Office Park
10 Muswell Road South 
Bryanston
(Postnet Suite 210, Private Bag X21, Bryanston, 2021)

Transfer secretaries
Computershare Investor Services Proprietary Limited

Sponsor
Nedbank Corporate and Investment Banking

www.deltafund.co.za

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