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Audited condensed consolidated results for the year ended 28 February 2021
Delta Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2002/005129/06)
JSE Share code: DLT
ISIN: ZAE000194049
(Approved as a REIT by the JSE)
("Delta" or "the Company" or "the Group")
SHORT-FORM ANNOUNCEMENT
Audited condensed consolidated results for the year ended 28 February 2021
Commentary
Introduction
The 2021 financial period was a watershed year for the Group. Corporate governance challenges and significant
macro-economic constraints as a result of COVID-19 hard economic lockdowns culminated in several far-reaching but
positive changes in the Group. Although still at an early stage, the Company has been stabilised and key performance
indicators are starting to track in the right direction, underpinned by a defensive portfolio.
Corporate governance
Corporate governance was bolstered considerably during the reporting period with the appointment of new members to the
Board of directors of Delta ("the Board") and with the Board driving a step-change in the Group's performance with the
support of the new interim and permanent executive leadership team. At the Asset Manager, suitably qualified incumbents
were appointed in key positions to streamline processes and ensure better performance and efficiencies.
Reinstatement of trading in Delta shares
As a consequence of the withdrawal of the 2020 financial statements following the Board's commissioning of independent
forensic investigations into irregularities at the Company, the JSE Limited ("JSE" or "the exchange") suspended trading
in the shares of Delta on 15 December 2020.
At the time of writing, the Company is engaging with the JSE to reinstate the trading of Delta's shares on the main
board of the exchange.
Operational overview
Delta's SA REIT funds from operations (previously distributable income) per share amounted to 31.33 cents for the year
ended 28 February 2021 (2020: 34.98 cents). 15 472m2 of new leases were concluded for the period, with a further
74 946m2 of leases renewed.
The impact of Covid-19 during the reporting period was less than expected. Assistance in the form of rental deferments
to the amount of R6.2 million was provided to predominantly smaller retail tenants on a case-by-case basis. Depending
on the impact of third-wave infections at the time of writing, this amount is not expected to be significant in the
current reporting year.
Portfolio vacancies increased from 21.8% to 23.6%. Negotiations with the Department of Public Works and Infrastructure
("DPWI") on the renewal of three bulk leases totalling 83 134m2 have recommenced following the Company's commitment to
spend capital to address legacy obligations.
Investment properties are valued annually and adjusted to fair value as at statement of financial position date. During
the reporting period, Delta's property portfolio was independently revalued at R8.2 billion (2020: R8.8 billion) and
consists of 100 properties with a total GLA of 909 984m2. The reduction in valuation is mainly as a result of increased
vacancies and the short lease profile of 15 months on the portfolio.
The management team believes that the portfolio valuation represents an accurate reflection of Delta's specific
operating environment, with the potential for valuation uplift as bulk leases are concluded and vacancies are filled.
LTV increased slightly from 55.7% in the prior year to 56.5% currently, mainly as a result of the negative fair value
adjustment to investment properties which was partially offset by the amortisation of debt. The management team remains
confident of reducing LTV to below 50% in the short- to medium term, and to below 40% in the longer term through the
effective conclusion of its capital recycling programme and the conclusion of longer lease terms.
Capital recycling programme
Of high priority is Delta's commitment to remedy both the Group's elevated LTV to below 50% and vacancies to within the
industry norm. While sale and acquisition activities have been largely muted due to the current macro-economic
environment, management is reviewing various strategies, including disposals of non-core assets to remedy the current
level of gearing.
The Board deemed Delta's 4.5% holding in the issued share capital of London-listed Grit Real Estate Income Group as
non-strategic and will dispose of these shares prudently. Considering Delta's current market capitalisation, any
significant disposals will be deemed a Category 1 transaction in terms of the JSE Listings Requirements, requiring
shareholder approval.
Financial results
Revenue decreased by 2.7% and was largely affected by increased vacancies in the portfolio and a
reversion on leases renewed, in line with previous market guidance. Property operating expenses increased by 16.91% due
to higher assessment rates, utility costs, security costs and increased bad debt provisions during the pandemic period.
NAV decreased 10% to R5.06 per share and was primarily affected by negative fair value adjustments totalling
R637 million, of which R517 million related to investment property and R68 million to the investment in Grit.
Distributions
In performing the Solvency and Liquidity test conducted in terms of Section 46 of the Companies Act, which takes into
consideration the working capital cash flow forecast, expected working capital requirements, capital expenditure
requirements and contracted tenant installations relating to historic lease renewals, the Board resolved not to declare
a distribution for the 2021 financial year.
Delta's ability to recommence with the payment of distributions is largely contingent on the successful resolution of
some variables, which are not all under the control of the Company:
- the ongoing uncertainty around the economic impact of COVID-19, especially the third wave of infections;
- the successful renegotiation of bulk lease renewals;
- the conclusion of the capital recycling programme;
- the reduction of the Group's vacancy rate; and
-the successful collections of outstanding arrears without having to resort to a legal process.
Should the above variables be successfully resolved, the Board conservatively estimates that distribution payment will
only be likely for the financial year ending 28 February 2023.
The conclusion of some or all of these variables, however, have the potential to significantly impact Delta's ability
to recommence paying distributions earlier.
Shareholders will be updated accordingly on the delivery against these key performance indicators, and market guidance
with regard to the payment of distributions will be appropriately revised.
Guidance on the payment of distributions has not been reviewed or reported on by Delta's external auditors.
Financial results
Audited Audited
year ended year ended
28 February 29 February
2021 2020 % change
Revenue (R'000) 1 446 1 486 (2.7)
Basic and diluted earnings
Basic and diluted loss per share (cents) (63.63) (131.02) (51.4)
Basic and diluted headline earnings per share (cents) 8.78 11.90 (26.2)
SA REIT funds from operations (previously distributable income)
per share (cents) 31.33 34.98 (10.43)
Dividends per share (cents)
- Interim - 12.19
- Final - -
The auditors have issued a qualified audit conclusion on the audited financial results. The auditors were unable to
satisfy themselves regarding the completeness of related parties and related party balances. In addition, an emphasis
of matter in respect of a material uncertainty related to going concern was raised.
The auditors' qualified audit opinion, containing key audit matters, together with the annual financial statements are
available for inspection at Delta's registered office and on the weblink https://www.deltafund.co.za/financials.
Any investment decisions made by investors and/or shareholders should be based on consideration of the full
announcement as a whole and shareholders are encouraged to review the full announcement, which is available on the
JSE website at https://senspdf.jse.co.za/documents/2021/jse/isse/DLT/fy2021.pdf and can be found on the Group's website
https://www.deltafund.co.za/financials/.
The contents of this short-form announcement are the responsibility of the board of directors of Delta. This short-form
announcement is a condensed version of the full announcement in respect of the audited annual Group results for the
year ended 28 February 2021 and does not contain full or complete details of the financial results.
The full announcement is available for inspection at the registered office, during business hours, at no charge and any
requests to the Company Secretary for copies will be dealt with by referring the requester to the appropriate link on
the Company's public website under the Investor Relations tab. The information contained in this short-form
announcement has been extracted from the audited annual Group results and has not been reviewed or reported on by
Delta's auditor.
By order of the Board
P Langeni B Masinga
(Chairman) (Interim CEO)
30 June 2021
Directors: P Langeni~ (Chairman), B Masinga* (Interim CEO), M de Lange* (CFO), N Khan~, DN Motau^, MJN Njeke#,
NN Afolayan^, MCR Rampheri^
*Executive, ^Independent non-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, a division of Nedbank Limited
http://www.deltafund.co.za
Date: 30-06-2021 05:31:00
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