RESULTS PRESENTATION for the year ended 28 February 2019 P RO P E RT Y F U N D www.deltafund.co.za
AGENDA P RO P E RT Y F U N D 01 Introduction and Business Update 02 Financial Review 03 Portfolio Review 04 Conclusion 05 Questions & Answers 06 Annexures
P RO P E RT Y F U N D www.deltafund.co.za INTRODUCTION AND BUSINESS UPDATE Sandile Nomvete
INTRODUCTION TO DELTA Sovereign Highly Market underpinned empowered fund capitalisation of JSE listed REIT Level 2 79.0% R1.8bn B-BBEE of revenue from sovereign tenants Rating on new sector codes as at 28 February 2019 Average property Assets under Dominant in value of management of Pretoria & R109.1m R11.8bn Durban CBDs (Feb 2018 : R109.6m) By 100% black-owned asset manager RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2019 4
BUSINESS UPDATE Delta experienced its toughest and most challenging year since its listing. Slow pace of lease renewals from DPW, increased vacancies and higher cost of debt resulted in distributable earnings declining. The board and management subsequently decided to retain 25% of earnings to facilitate capital expenditure and working capital in the business, resulting in distribution of 55.39 cents per share being declared. Leasing Progress Robust engagement and negotiations held during FY2019 Significant progress in renewals underway in FY2020 New leasing Vacancies Tough economic environment with many funds impacted by higher vacancies Bloemfontein provincial leases continue to impact vacancies with tenants moving to alternate premises Sunninghill still challenging, however, significant progress seen in the market recently RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2019 5
BUSINESS UPDATE cont… Debt Funding Low WALE and non-conclusion of DPW renewals significantly impacted our ability to renew expiring facilities for longer periods Our long-standing banking partners approved extensions, however, at higher interest costs and associated fees due to increased risk Disposals Our market is limited due to our assets that are configured to sovereign tenants BEE opportunities to acquire and secure long-term leases prevalent in the market but access to funding seen as barrier Improvement in economic environment and increased lending by banks post elections should provide traction on disposals RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2019 6
P RO P E RT Y F U N D www.deltafund.co.za FINANCIAL REVIEW Shaneel Maharaj
FINANCIAL PERFORMANCE 2019 Loan to Extended Fixed value of facilities totalling debt of 45.1% 59.8% R2.1billion (Feb 2018 : 41.3%) (Feb 2018 : R941 million) (Feb 2018 : 85.4%) Debtors outstanding Property Interest at operating margin at cover ratio 31 days 67.8% 2.1 (Feb 2018 : 18.5 days) (Feb 2018 : 73.5%) (Feb 2018 : 2.4) RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2019 8
FIVE YEAR REVIEW 2019 2018 2017 2016 2015 Revenue (R’000) 1 547 365 1 564 053 1 617 344 1 247 582 1 009 207 Net property income (R’000) 1 037 786 1 149 885 1 153 341 925 531 764 884 Finance costs (R’000) 537 281 482 179 470 580 412 713 316 380 Cost to income ratio - gross method 32.2% 26.5% 28.8% 26.4% 26.0% Cost to income ratio - net method 18.3% 12.1% 12.4% 12.2% 10.2% Investment property (R’000) 11 350 331 11 507 600 11 381 421 10 095 181 8 420 400 Investment in listed securities (R’000) 461 822 381 868 429 588 472 546 502 986 Borrowings (R’000) 5 258 471 4 952 690 5 099 227 5 094 310 4 508 565 Loan to value (LTV) 45.1% 41.3% 41.5% 47.2% 49.9% Weighted average interest rate 10.2% 9.2% 9.2% 8.8% 8.1% Average debt expiry period (years) 0.8 1.5 1.9 2.3 2.4 Average debt fix expiry period (years) 2.1 1.5 2.2 2.1 2.4 Fixed: floating debt (excluding revolvers) 59.8% 85.4% 85.1% 83.5% 78.0% Net asset value per share (exclusive of deferred tax) R9.30 R10.06 R9.91 R10.61 R10.02 RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2019 9
DISTRIBUTABLE INCOME STATEMENT Feb 2019 Feb 2018 Net property income (excl. straight line accrual) 1 072 090 1 147 865 Administration expenses (79 727) (53 329) Net finance costs (511 249) (462 483) Dividend income - GRIT 39 187 35 666 Other income 6 356 20 287 Antecedent interest 569 257 Prior year retained earnings distributed - 3 378 Distributable income for the period 527 226 691 641 Number of shares in issue 714 229 718 711 844 486 Full year distributable earnings per share (cents) 73.84 97.24 Distribution per share declared for the year (cents) 55.39 97.24 RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2019 10
ANALYSIS OF DISTRIBUTIONS DECLARED HISTORIC DISTRIBUTION PER SHARE (CENTS/SHARE) H1 – Interim 23.1% 9.6% 15.6% 7.2% 8.7% 8.0% 7.1% 7.1% 7.1% 1.0% (1.0)% 0% (15.1)% (68.5)% (43,0)% H2 – Final Total – Full year 97,24 97,24 90,8 84,1 72,7 55,39 51,3 50,8 47,9 46,4 45,9 44,1 42,9 40,2 40,0 39,4 32,5 23,7 16,0 FY2013 H1 Aug- H2 Feb- FY2014 H1 Aug- H2 Feb- FY2015 H1 Aug- H2 Feb- FY2016 H1 Aug- H2 Feb- FY2017 H1 Aug- H2 Feb- FY2018 H1 Aug- H2 Feb- FY2019 13 14 14 15 15 16 16 17 17 18 18 19 RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2019 11
DISTRIBUTABLE EARNINGS BRIDGE R’000 312 5 196 3 521 (3 378) (13 931) 6 466 691 641 (19 953) (36 642) (48 767) (57 240) 527 224 H2 Feb 2018 Net property Admin Dividend Antecedent Prior year Other income Vacancies Disposals Net finance Provisions H2 Feb 2019 income expenses income (Grit) dividend retained costs raised earnings distributed RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2019 12
LIKE-FOR-LIKE NET PROPERTY INCOME ANALYSIS Amount Description % (R’000) Net property income (NPI) Feb 2018 1 147 865 Increased NPI from base portfolio held at 28 Feb 2018 (36 353) (3.2)% NPI attributable to disposals and non-core assets FY18 (39 422) (3.4)% NPI Feb 2019 (excl. straight line accrual) 1 072 090 (6.6)% Increased NPI from base portfolio held at 28 Feb 2018 (36 353) NPI attributable to Disposals and non-core assets FY19 690 Like-for-like increase in NPI Feb 2019 (35 663) (3.1)% RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2019 13
STATEMENT OF FINANCIAL POSITION R’000 Feb 2019 Feb 2018 Change % ASSETS Non-Current assets 10 377 347 10 919 425 (4.96%) Investment property 9 913 811 10 535 000 (5,96%) Fair value of property portfolio 9 755 209 10 342 418 (5.68%) Straight line rental income accrual 158 602 192 582 (17.64%) Investment in other assets 461 822 381 868 20.94% Other non-current assets 1 714 2 557 (32.97%) Current assets 453 205 543 256 (16.58%) Non-current assets held-for-sale 1 436 520 972 600 47.70%) Total assets 12 267 072 12 435 281 (1.35%) EQUITY AND LIABILITIES Total equity 6 641 445 7 158 592 (7.22%) Liabilities 5 625 627 5 276 689 6.61% Non-current liabilities 1 470 696 2 720 230 (45.93%) Current liabilities 4 154 931 2 556 459 62.53% Total equity and liabilities 12 267 072 12 435 281 (1.35%) RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2019 14
NAV BRIDGE Rands 0.02 0.11 0.62 10,06 -0.93 -0.32 9.30 -0.20 -0.02 -0.02 -0.01 -0.01 28 Feb 2018 Contribution Fair value of Dividend Dividend paid Fair value of Deferred Fair value of Debt facilities Disposals FCTR recognised 28 Feb 2019 from operations listed reinvestment investment consideration financial raised in profit and loss investments property settled instruments & forex losses RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2019 15
DEBT SUMMARY As at 28 February 2019 Facility Type R’ m Weighted Ave. Rate Floating bank facilities 4 339 11.0% Fixed bank facilities 212 9.5% Revolving bank facilities 706 9.7% Total borrowings, net of accrued interest 5 257 10.2% Accrued interest 17 Debt Structuring fees (16) TOTAL 5 258 Total fixed bank facilities 212 9.5% Interest rate swap contracts 2 020 7.9% Cross currency swaps 139 Libor + 2.9% Total fixed 2 371 Fixed % (excluding revolvers) 59.8% 10.2% RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2019 16
DEBT COMMENTARY Extended R2.1billion in expiring debt facilities during the year 59.8% (2018: 85.4%) of borrowings are fixed for an average period of 0.8 years (2018: 1.5) using a combination of interest rate swaps, cross currency swaps and fixed facilities. The deterioration in fix % was due to fixed facilities being converted into floating facilities when extended The weighted average cost of debt increased to 10.2% (2018: 9.2%) primarily due to higher interest rates on facilities extended Loan to value ratio increased to 45.1% (2018: 41.3%),impacted by the negative fair value adjustment on investment properties of R227 million coupled with increased borrowings. We expect an improvement in the LTV once leases are concluded and the portfolio is revalued Interest cover ratio at 2.1 (2018: 2.4), impacted by higher interest costs and vacancies RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2019 17
P RO P E RT Y F U N D www.deltafund.co.za PORTFOLIO REVIEW Otis Tshabalala
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