Wrap Text
Unaudited condensed consolidated interim results for the six months ended 28 February 2019
DIPULA INCOME FUND LIMITED
(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")
Unaudited condensed consolidated interim results for the six months ended 28 February 2019
BUSINESS AND PERFORMANCE HIGHLIGHTS
Larger, improved quality, well diversified and soundly managed portfolio for resilience!
Business highlights
Total assets up 23%
Revenue up 23% (excluding straight-line rental)
Vacancies reduced by 23%
Improved credit rating to BBB+ (ZA) and A2 (ZA)
Performance highlights
Distributable earnings up 19% to R257.6 million
Combined share dividend 97.33751 cents per share (in line with guidance)
A-share dividend up 4.1% to 54.83455 cents per share
B-share dividend 42.50296 cents per share
Commentary
Introduction
The prevailing tough economic environment in SA continued to pose a challenge to the group. In
line with market guidance for the six months ended 28 February 2019 ("the period"), Dipula
recorded flat growth in dividends per share on a combined basis. This resulted in an increase in
dividends per A-share in line with Dipula's distribution policy while the B-share dividend was
marginally down on the prior period.
Acquisitions of R1.5 billion concluded during the latter part of the 2018 financial year resulted in a
23% increase in the value of the group's property portfolio and a significant enhancement in the
quality of its assets. The period-on-period growth in revenue of 23% and distributable earnings of
19% was mainly due to these acquisitions.
The group maintained its strategy of maximising returns through, quality enhancing acquisitions,
"sweating" its assets, strategic refurbishments and focused management.
Dipula's strategy to internalise the management of its portfolio is paying off as evidenced in its
occupancies which are 23% higher than the prior period and the achievement of a 0.4% positive
rental renewal rate under extremely challenging economic conditions.
Furthermore, the group was rewarded for its improved quality of assets and stability through a
credit rating upgrade from BBB (ZA) long term and A3 (ZA) short term to BBB+ (ZA) long term and
A2 (ZA) short term.
Profile
Dipula is a Johannesburg-based internally managed REIT that owns a diversified portfolio,
comprising mainly retail, office and industrial properties located across all provinces in South Africa.
The majority are located in Gauteng. Dipula also selectively invest in residential rental stock.
Dipula trades under the codes DIA and DIB. Dipula's A-shareholders are entitled to a dividend
growth of the lower of 5% or the consumer price index ("CPI"), while B-shareholders receive the
remaining net distributable earnings.
Distributable earnings
Distributable earnings increased 19% to R257.6 million (February 2018: R216.4 million) mainly due
to the conclusion of prior year acquisitions and modest like-for-like growth. Taking into account
relatively low like-for-like income growth and the increased number of issued shares to fund the
acquisitions, this growth in distributable income resulted in flat dividends per combined share
period-on-period (February 2018: 4.6%) growth.
The dividend attributable to A-shares increased 4.1% period-on-period to 54.83455 cents per
share (February 2018: 52.67488 cents) and is in line with the distribution policy to A-shareholders.
The dividend attributable to B-shares decreased by 3.6% to 42.50296 cents per share (February
2018: 44.07594 cents).
Property portfolio
At period-end, Dipula's property portfolio of 199 properties (February 2018: 174 properties)
remained largely unchanged from the 2018 financial year-end. However, it is of a significantly better
quality than at Dipula's listing and up 23% in value from the prior period at a total value at R8.6 billion
(February 2018: R7.1 billion), with a total gross lettable area ("GLA") of 928 580 m2 (February 2018:
748 978 m2 GLA).
All the properties recently acquired were transferred in the prior year ended 31 August 2018 and
are performing in line with expectations.
Dipula spent R80 million on strategic refurbishments, most of which have since been substantially
let to good quality tenants. These initiatives continue to contribute substantially to the improvement
of the quality of the portfolio. The group continues to streamline its management operations and
drive efficiencies as seen in its 16% reduction in the property cost to income ratio, which reduced
to 17.5% from 20.9% in the prior period.
Cost-to-income ratios
February February
2019 2018
Property cost to income (gross basis) 32.3% 34.5%
Property cost to income (net basis) 17.5% 20.9%
Total cost to income (gross basis) 35.2% 36.7%
Total cost to income (net basis) 21.1% 23.5%
Sectoral and geographic profile
The sector and geographic breakdown of Dipula's portfolio at 28 February 2019 is set out below:
Sectoral profile by GLA (%)
- Retail 50%
- Office 14%
- Industrial 36%
Sectoral split by gross rental income (%)
- Retail 66%
- Office 20%
- Industrial 14%
Geographic profile by GLA (%)
- Gauteng 57.1%
- Eastern Cape 11.4%
- Limpopo 10.0%
- KwaZulu-Natal 9.6%
- North West 3.4%
- Mpumalanga 3.3%
- Western Cape 2.7%
- Free State 2.3%
- Northern Cape 0.2%
Geographic split by gross rental income (%)
- Gauteng 64.3%
- Eastern Cape 7.9%
- Limpopo 9.5%
- KwaZulu-Natal 8.3%
- North West 3.1%
- Mpumalanga 2.3%
- Western Cape 2.6%
- Free State 1.9%
- Northern Cape 0.1%
Dipula lease expiry profile
Average
monthly gross
GLA income
(000 m2) (Rm)
Vacant 73 -
FY2019 138 13
FY2020 112 11
FY2021 125 14
FY2022 112 11
>FY2022 349 25
At the August 2018 financial year-end, Dipula reported that leases representing 204 000 m2 were
up for renewal in 2019. During the reporting period Dipula renewed 38 000 m2 of GLA at an average
escalation of 7.3% (a positive renewal rate of 0.4%) and an average weighted lease expiry of 3.4 years.
The renewal of the remaining expiries is progressing well and should be concluded in the second half of
the year. The group furthermore achieved an impressive retention ratio of 82% during the period, as a
direct result of focused in-house management that led to improved customer service.
Vacancies
Vacancies reduced by 23% to 8.0% (2018: 10.4%) due mainly to a reduction in office and industrial
vacancies. The breakdown of vacancies by sector is as follows: Retail 8.0% (2018: 8.1%), Offices
7.9% (2018: 15.3%) and Industrial 8.0% (2018: 12.9%).
Some of the group's letting that was anticipated earlier only becomes effective in the second half
of the year and will have a negative impact on the full year performance. The highly competitive
market has also resulted in increased leasing costs and incentives.
Sectorial performance
Retail
Dipula's retail portfolio has been affected by the current slow economic growth with tenants
adopting a more cautious approach and changing their business models.
Retail vacancies remained steady at 8% with 84% of the tenants whose leases expired having
been retained with a positive renewal rate of 1.2%. Most of the group's retail vacancy is related to
non-core, specialised, high street and strip centres while our shopping centres (with a few
exceptions) have high occupancy levels.
Offices
Notwithstanding oversupply and tough trading conditions for the office sector, Dipula's office
portfolio performed well with vacancies dropping by 48% to 7.9% well ahead of the SAPOA
average of 11.1%. This resulted from superior management and a substantial improvement in the
quality of this portfolio due to strategic acquisitions and refurbishments.
Dipula is at an advanced stage with renewing its Department of Public Works ("DPW") leases and
expects these to be concluded imminently.
During the period the office portfolio achieved an impressive 89% tenant retention and has a WALE
of 2 years on aggregate, which should improve as short dated DPW leases are renewed in the
second half.
The WALE achieved in respect of new leases concluded to date was 5.8 years and renewals were
concluded at an impressive 9.1% positive renewal rate.
Industrial
Dipula's industrial portfolio's performance was affected by the withdrawal from South Africa of a
large multinational but most of this space has now been relet.
Shorter leases were concluded in various mini units, with an overall WALE of 1.8 years for new
leases and a 2.6 year WALE for renewals. The aggregate portfolio WALE remains good at 4 years.
Dipula's industrial portfolio recorded a negative reversion of 12.2% on renewals since an aggressive
strategy was required in order to retain tenants.
Industrial vacancies dropped 38% from the prior period and even more post period and are now
sitting at 5.8%.
Disposals
During the period, Dipula disposed of four properties for R8.3 million at an average yield of 11%.
In line with Dipula's portfolio optimisation strategy, additional properties are earmarked for disposal
in the medium term.
Refurbishments and developments
A total of R80 million was spent on various projects during the period.
The Range Road extension was completed in April 2019 at a cost of R25 million, effectively adding
1 925 m2 GLA and increasing the total GLA of the facility to 12 905 m2. A new 10-year lease has
been successfully signed.
Refurbishments amounting to R27 million are currently in progress at New Brighton, Norwood,
Belle Ombre and Orange Farm Town Square. These are mainly motivated by new leases at improved
rental terms.
Funding
At 28 February 2019, Dipula's all-in blended rate of interest was 9.24% (2018: 9.19%). The company
has total debt facilities of R3.6 billion. The weighted average debt expiry is 2.9 years and the hedge
expiry is 2.2 years.
80% of the interest has been fixed at the end of the period (2018: 91%).
Debt maturity and hedging profile
Facility Fixed/swap Floating
Financial year-end R'000 % R'000 % R'000 %
FY2019 448 303 12.4 325 000 9.0 123 303 3.4
FY2020 750 391 20.7 756 250 20.9 (5 859) (0.2)
FY2021 845 067 23.4 800 000 22.1 45 067 1.3
FY2022 750 127 20.7 700 000 19.3 50 127 1.4
FY2023 624 603 17.3 300 000 8.3 324 603 9.0
FY2024 200 400 5.5 - - 200 400 5.5
3 618 891 100 2 881 250 79.6 737 641 20.4
Changes to the board
No changes to the board of directors ("the board") were effected during the period.
Prospects
It is the opinion of the board that prevailing difficult trading conditions will continue in the six
months ahead to year-end. Furthermore, difficult headwinds and an embattled property market will
continue to pose challenges but there is room for some optimism in the medium to long term. Over
the next 18 months, R449 million worth of value enhancing developments, upgrades and revamps
are planned. Further headway will be made in respect of leasing and with efficient management of
cost, growth should be achievable in the medium to long term.
The board has revised its dividend per share forecast on the combined share for the year ending
31 August 2019 from flat to 5% down compared to the previous year. Assuming CPI remains at
4.1% this will translate to the A-share receiving a dividend of 110.14363 cents per share and the
B-share receiving 85.06647cents per share.
The reduction in dividend growth compared to previous guidance is due to less than expected
lease renewal rates, higher costs of leasing, longer lead times for new leases, tenants vacating
space due to changing business models and the impact of the economic slowdown on tenants.
The group remains focused on improving the quality of its portfolio through strategic interventions.
The board is optimistic about growth prospects in the medium term as the country stabilises on the
political front and a clearer policy directive unfolds, which should result in improved business
confidence. Any positive growth in the economy will translate into expansion of the property sector
leading to improved rentals and take-up of vacant space.
This forecast assumes that macroeconomic conditions do not deteriorate further, no major
corporate failures occur and that tenants will be able to absorb rising utility and assessment rates
costs. Forecast rental income is based on contractual escalations and market-related renewals.
This forecast has not been reviewed or reported on by the group's independent external auditors.
Payment of interim dividend
The board has approved and notice is hereby given of the interim dividend (dividend number 16)
for the period 1 September 2018 to 28 February 2019 of 54.83455 cents per A-share and 42.50296
cents per B-share.
The dividend is payable to Dipula shareholders in accordance with the timetable set out below:
Last day to trade cum dividend Tuesday, 11 June 2019
Shares trade ex dividend Wednesday, 12 June 2019
Record date Friday, 14 June 2019
Payment date Tuesday, 18 June 2019
Share certificates may not be dematerialised or rematerialised between Wednesday, 12 June 2019
and Friday, 14 June 2019, both days inclusive.
The dividend will be transferred to dematerialised shareholders' CSDP accounts/broker accounts
on Tuesday, 18 June 2019. Certificated shareholders' dividend payments will be paid to certificated
shareholders' bank accounts on or about Tuesday, 18 June 2019.
An announcement relating to the tax treatment will be released separately on SENS.
On behalf of the board
Zanele Matlala
Chairperson
Izak Petersen
CEO
22 May 2019
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited six Unaudited six Audited
months ended months ended year ended
28 February 28 February 31 August
2019 2018 2018
R'000 R'000 R'000
ASSETS
Non-current assets 8 937 356 7 149 994 8 944 839
Investment property 8 640 400 6 911 103 8 607 859
Fair value of property portfolio 8 424 435 6 748 850 8 427 249
Straight-line rental income accrual 215 965 162 253 180 610
Intangible assets 93 750 144 577 112 500
Property, plant and equipment 3 906 1 574 3 886
Derivative financial assets 4 010 271 26 315
Loan receivable 195 290 92 469 194 279
Current assets 252 288 205 775 298 532
Trade and other receivables 202 164 173 114 208 266
Derivative financial assets 493 - 1 202
Cash and cash equivalents 49 631 32 661 89 064
Non-current assets held-for-sale
Investment property held-for-sale 25 021 164 446 30 013
Total assets 9 214 665 7 520 215 9 273 384
EQUITY AND LIABILITIES
Shareholders' interest 5 232 126 4 537 595 5 308 816
Stated capital 4 243 513 3 460 604 4 243 513
Fair value reserve 1 010 048 1 033 359 1 037 803
Retained income (21 435) 43 632 27 500
Non-controlling interests 155 796 - 155 796
Non-current liabilities 2 739 784 1 830 204 2 602 100
Interest-bearing liabilities 2 680 140 1 758 918 2 546 926
Non-interest-bearing liabilities 51 007 50 154 51 124
Derivative financial liabilities 8 637 21 132 4 050
Current liabilities 1 086 959 1 152 416 1 206 672
Interest-bearing liabilities 905 364 1 032 079 974 225
Bank overdraft 20 000 - 20 048
Trade and other payables 159 829 120 337 209 648
Derivative financial liabilities 1 766 - 2 751
Total equity and liabilities 9 214 665 7 520 215 9 273 384
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
28 February 28 February 31 August
2019 2018 2018
R'000 R'000 R'000
Revenue 687 734 537 160 1 141 348
Contractual rental income 529 239 419 018 860 027
Municipal and property recoveries 123 140 111 484 217 557
Other income - - 38 750
Straight-line rental income accrual 35 355 6 658 25 014
Property-related expenses (210 988) (183 082) (362 824)
Net property income 476 746 354 078 778 524
Administration and corporate costs (18 805) (11 519) (24 470)
Net operating profit 457 941 342 559 754 054
Net finance cost (152 619) (120 723) (231 605)
Finance income 10 556 13 229 42 103
Finance cost (163 175) (133 952) (273 708)
Net profit after finance cost 305 322 221 836 522 449
Transaction costs on business combination - (2 543) (2 543)
Loss on sale of property, plant
and equipment - - (153)
Amortisation of intangible assets (18 750) (18 750) (37 500)
Goodwill impaired - - (13 327)
Fair value adjustments (63 110) 27 908 13 996
Investment properties and properties
held-for-sale (1 139) 20 626 (16 507)
Straight-line rental income accrual (35 355) (6 658) (25 014)
Interest rate swaps (26 616) 13 940 55 517
Profit before taxation 223 462 228 451 482 922
Taxation - - -
Profit for the period after taxation 223 462 228 451 482 922
Other comprehensive income - - -
Total comprehensive income for the period 223 462 228 451 482 922
Total profit and comprehensive income
for the period attributable to:
Shareholders of the company 211 090 227 163 471 540
Non-controlling interests 12 372 1 288 11 382
223 462 228 451 482 922
Basic and diluted earnings per
A-share (cents) 39.88 51.33 99.09
Basic and diluted earnings per
B-share (cents) 39.88 51.33 99.09
EARNINGS, HEADLINE EARNINGS AND DIVIDENDS
Unaudited Unaudited Audited
28 February 28 February 31 August
2019 2018 2018
R'000 R'000 R'000
Reconciliation between profit, earnings
and headline earnings
Earnings 211 090 227 163 471 540
Adjustments: 36 494 (13 968) 59 095
Goodwill impaired - - 13 327
Fair value - investment properties and
held-for-sale 1 139 (20 626) 20 754
Fair value - straight-line rental income 35 355 6 658 25 014
Headline earnings 247 584 213 195 530 635
Total number of shares in issue* 529 282 638 448 276 813 529 282 638
Number of A-shares in issue 264 641 319 219 172 546 264 641 319
Number of B-shares in issue 264 641 319 229 104 267 264 641 319
Total weighted average number of
shares in issue* 529 282 638 442 573 468 475 853 506
Weighted average number of A-shares
in issue* 264 641 319 218 817 494 236 062 841
Weighted average number of B-shares
in issue* 264 641 319 223 755 974 239 790 665
Headline earnings per A-share (cents) 46.78 48.17 111.51
Headline earnings per B-share (cents) 46.78 48.17 111.51
Dividend per A-share 54.83455 52.67488 105.80560
Interim 54.83455 52.67488 52.67488
Final - - 53.13072
Dividend per B-share 42.50296 44.07594 99.67872
Interim 42.50296 44.07594 44.07594
Final - - 55.60278
Combined share 97.33751 96.75082 205.48432
Interim 97.33751 96.75082 96.75082
Final - - 108.73350
Net asset value per A-share (cents) 988.53 1 012.23 1 003.02
Net asset value per B-share (cents) 988.53 1 012.23 1 003.02
Loan to Value ("LTV") 41.6% 39.7% 40.6%
* Net of treasury shares.
Basic and headline earnings per share are based on the weighted average number of shares in issue during the period.
The company does not have any dilutionary instruments in issue.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Stated Fair value Retained
capital reserve income
R'000 R'000 R'000
Balance at 31 August 2017 (audited) 3 346 742 998 793 78 938
Total comprehensive income for the period - - 227 163
Dividends declared - - (227 903)
Shares issued net of share issue expenses 113 862 - -
Transfer to fair value reserve
- investment properties - 20 626 (20 626)
Transfer to fair value reserve
- interest rate swaps - 13 940 (13 940)
Balance at 28 February 2018 (unaudited) 3 460 604 1 033 359 43 632
Balance at 31 August 2018 (audited) 4 243 513 1 037 803 27 500
Total comprehensive income for the period - - 211 090
Dividends declared - - (287 780)
Transfer from fair value reserve
- investment properties - (1 139) 1 139
Transfer from fair value reserve
- interest rate swaps - (26 616) 26 616
Balance at 28 February 2019 (unaudited) 4 243 513 1 010 048 (21 435)
Non-
controlling Total
interest equity
R'000 R'000
Balance at 31 August 2017 (audited) - 4 424 473
Total comprehensive income for the period 1 288 228 451
Dividends declared (1 288) (229 191)
Shares issued net of share issue expenses - 113 862
Transfer to fair value reserve
- investment properties - -
Transfer to fair value reserve
- interest rate swaps - -
Balance at 28 February 2018 (unaudited) - 4 537 595
Balance at 31 August 2018 (audited) 155 796 5 464 612
Total comprehensive income for the period 12 372 223 462
Dividends declared (12 372) (300 152)
Transfer from fair value reserve
- investment properties - -
Transfer from fair value reserve
- interest rate swaps - -
Balance at 28 February 2019 (unaudited) 155 796 5 387 922
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
28 February 28 February 31 August
2019 2018 2018
R'000 R'000 R'000
Cash flows from operating activities
Cash generated from operations 423 579 309 284 713 649
Net finance cost (153 097) (121 105) (237 337)
Dividends paid (300 152) (227 903) (491 103)
Net cash utilised in operating activities (29 670) (39 724) (14 791)
Cash flows from investing activities
Acquisition of investment properties
and capital expenditure (79 294) (136 247) (1 982 997)
Acquisition of business combination - (44 839) (47 382)
Net acquisition of property, plant
and equipment (310) (233) (3 344)
Proceeds on disposal of investment
properties 8 334 52 194 201 416
Loans (repaid)/advanced (1 011) - 89 936
Net cash utilised in investing activities (72 281) (129 125) (1 742 371)
Cash flows from financing activities
Issue of shares net of share
issue expenses - 13 562 796 471
Shares issued to non-controlling
interests - - 151 549
Non-interest-bearing liabilities
(repaid)/raised (117) 89 936 51 124
Interest-bearing liabilities
raised/(repaid) 62 683 (32 214) 696 808
Net cash generated from
financing activities 62 566 71 284 1 695 952
Net decrease in cash and cash
equivalents (39 385) (97 565) (61 210)
Cash and cash equivalents at the
beginning of the period 69 016 130 226 130 226
Cash and cash equivalents at the
end of the period 29 631 32 661 69 016
CONDENSED CONSOLIDATED SEGMENTAL INFORMATION
Retail Offices Industrial
R'000 R'000 R'000
Six months ended 28 February 2019
Extracts from the statement of
comprehensive income
Contractual rental income and
recoveries (excluding straight-line) 438 480 125 662 88 237
Property-related expenses (141 786) (36 452) (17 450)
Net property income 296 694 89 210 70 787
Extracts from the statement of
financial position
Investment property at fair value 5 424 310 1 766 836 1 419 048
Investment property held-for-sale 18 546 6 475 -
Total 5 442 856 1 773 311 1 419 048
Six months ended 28 February 2018
Extracts from the statement of
comprehensive income
Contractual rental income and
recoveries (excluding straight-line) 379 029 86 520 64 953
Property-related expenses (131 752) (31 839) (19 483)
Net property income 247 277 54 681 45 470
Extracts from the statement of
financial position
Investment property at fair value 4 612 492 1 267 394 1 003 994
Investment property held-for-sale 161 900 - -
Total 4 774 392 1 267 394 1 003 994
Land Corporate Total
R'000 R'000 R'000
Six months ended 28 February 2019
Extracts from the statement of
comprehensive income
Contractual rental income and
recoveries (excluding straight-line) - - 652 379
Property-related expenses (9) (15 291) (210 988)
Net property income (9) (15 291) 441 391
Extracts from the statement of
financial position
Investment property at fair value 30 206 - 8 640 400
Investment property held-for-sale - - 25 021
Total 30 206 - 8 665 421
Six months ended 28 February 2018
Extracts from the statement of
comprehensive income
Contractual rental income and
recoveries (excluding straight-line) - - 530 502
Property-related expenses (8) - (183 082)
Net property income (8) - 347 420
Extracts from the statement of
financial position
Investment property at fair value 27 223 - 6 911 103
Investment property held-for-sale 2 546 - 164 446
Total 29 769 - 7 075 549
The entity has four reportable segments and corporate 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.
Unaudited Unaudited Audited
28 February 28 February 31 August
2019 2018 2018
R'000 R'000 R'000
Reconciliation of reportable segment
revenue and profit
Revenue
Total revenue for reportable segments 652 379 530 502 1 116 334
Straight-line rental income accrual 35 355 6 658 25 014
Consolidated revenue 687 734 537 160 1 141 348
Profit
Total profit for reportable segments 441 391 347 420 753 510
Straight-line rental income accrual 35 355 6 658 25 014
Administration and corporate costs (18 805) (11 519) (24 470)
Net finance cost (152 619) (120 723) (231 605)
Transaction costs on business
combination - (2 543) (2 543)
Fair value adjustments (63 110) 27 908 13 996
Loss on sale of property, plant and
equipment - - (153)
Amortisation of intangible assets/
goodwill impaired (18 750) (18 750) (50 827)
Profit before taxation 223 462 228 451 482 922
Distributable earnings
Reconciliation of profit for the year
to distributable earnings
Profit attributable to shareholders
of the company 211 090 227 163 471 540
Fair value - investment properties
revaluation 1 139 (20 626) 16 507
Fair value - straight-line rental income 35 355 6 658 25 014
Fair value - interest rate swaps 26 616 (13 940) (55 517)
NCI portion of fair value adjustment - - 4 247
Antecedent interest - 2 538 13 881
Transaction costs on business
combination - 2 543 2 543
Loss on sale of property, plant
and equipment - - 153
Amortisation of intangible
assets/goodwill impaired 18 750 18 750 50 827
Straight-line rental income accrual (35 355) (6 658) (25 014)
Distributable earnings and
dividends declared 257 595 216 428 504 181
Distribution statement
Revenue 652 379 530 502 1 116 334
Contractual rental income 529 239 419 018 860 027
Recoveries and other income 123 140 111 484 256 307
Property-related expenses (210 988) (183 082) (362 824)
Net property income 441 391 347 420 753 510
Administration and corporate costs (18 805) (11 519) (24 470)
Net operating profit 422 586 335 901 729 040
Net finance cost (152 619) (120 723) (231 605)
Antecedent dividend - 2 538 13 881
Non-controlling interests (12 372) (1 288) (7 135)
Distribution 257 595 216 428 504 181
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The unaudited condensed consolidated interim financial statements ("interim report") are prepared
in accordance with the JSE Listings Requirements and the requirements of the Companies Act,
71 of 2008 of South Africa. The interim report has been prepared in accordance with 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 accounting policies applied in the preparation of the condensed
consolidated interim financial statements are in accordance with International Financial Reporting
Standards ("IFRS") and, with the exception of the adoption of IFRS 9: Financial Instruments and
IFRS 15: Revenue from Contracts, are consistent with those applied in the preparation of the
previous consolidated audited financial statements for the year ended 31 August 2018.
The group has adopted IFRS 9: Financial Instruments and IFRS 15: Revenue from contracts with
customers and the adoption thereof did not have any material impact on the results for the period.
These results have been prepared under the historical cost convention, except for investment
properties, which are measured at fair value, and certain financial instruments, which are measured
at either fair value or amortised cost.
This interim report was prepared under the supervision of Mr R Asmal, in his capacity as group
financial director and has not been reviewed or reported on by the company's auditors.
Measurement of fair value
Investment property
On an annual basis, properties above R12 million (at the last valuation date) and one-third of
properties below R12 million are valued by independent external registered valuers.
The remaining two-thirds are valued internally by directors.
The properties are valued using either the discounted cash flow or capitalisation methods by the
directors and external valuers. The valuations are 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 range between 7.8% and 13.3%. 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. 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 and there were no
transfers between levels.
Unaudited Unaudited
28 February 28 February
2019 2018
R'000 R'000
Fair value measurements for investment
properties categorised as Level 3:
Balance at the beginning of the year 8 607 859 6 882 691
Acquisitions/additions 33 809 179 171
Transferred to non-current assets
held-for-sale/disposals (4 373) (152 968)
Tenant installation/lease commission 3 105 2 209
Balance at the end of the period 8 640 400 6 911 103
Valuation technique and significant unobservable inputs
Investment properties
Inter-relationship between
key unobservable
Significant inputs and fair value
Valuation technique unobservable inputs measurement
Discounted cash flows: - Expected rental growth The estimated fair value
The valuation model considers varies between 6% would increase/(decrease) if:
the present value of net cash and 8% per annum; - expected rentals were
flows to be generated from - Risk-adjusted discount higher/(lower);
the property taking into account rates vary between - risk-adjusted discount
expected rental and capitalisation 14% and 16.5%. rates and capitalisation
rates. The expected net cash rates were lower/(higher).
flows are discounted using risk-
adjusted discount rates. Among
other factors, the discount rate
estimation considers the quality
of the property, its location and
lease terms.
Capitalisation model: Establishes - Capitalisation rates The estimated fair value
the market-related rental income vary between 7.8% would increase/(decrease) if:
for the property and applies an and 13.25%. - Capitalisation rates were
appropriate capitalisation rate. lower/(higher).
Derivative financial instruments - Level 2:
Interest rate swaps
Valuation technique Significant unobservable inputs
Valued by discounting the future cash - Interest rate swap curve
flows using the South African swap
curve at the dates when the cash
flows take place.
The fair value of other financial instruments approximate their carrying values.
Subsequent events
Declaration of dividend after reporting date
The declaration of dividend occurred after the end of the reporting period, resulting in a non-
adjusting event that is not recognised in the financial statements.
Corporate information
Directors
ZJ Matlala* (Chairperson)
IS Petersen (CEO)
BH Azizollahoff*#
R Asmal (FD)
E Links*
Y Waja*
SA Halliday*
* Independent non-executive
# British
Registered office and business address
12th Floor
Firestation Rosebank
16 Baker Street
Rosebank
2196
Independent auditors
Deloitte & Touche
Practice number: 902276
Registered Auditors
Deloitte Place
The Woodlands
20 Woodlands Drive
Woodmead
Sandton
Transfer secretaries
Link Market Services South Africa Proprietary Limited
(Registration number 2000/007239/07)
13th Floor
19 Ameshoff Street
Braamfontein
2001
Bankers
The Standard Bank of South Africa Limited
(Registration number 1962/000738/06)
3rd Floor
East Wing
30 Baker Street
Rosebank
2196
Corporate advisor and sponsor
Java Capital
6A Sandown Valley Crescent
Sandton
2196
Company secretary
CIS Company Secretaries Proprietary Limited
(Registration number 2006/024994/07)
Rosebank Towers
15 Biermann Avenue
Rosebank
2196
http://www.dipula.co.za
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