Delta Property Fund has recently released its Year end February 2019 financial results.

I have decided to look at the key figure which is significant for Real Estate Investment Trust investors. A performance of Delta Property fund shown by final distributable earnings compared to previous years.

Sandile-Hopeson-Nomvete
Sandile Hopeson Nomvete, Delta Property Fund CEO. (image by deltafund.co.za)

Delta Property Fund’s distributable earnings declined to 73.84c a share from 97.24c from previous year.

What are distributable earnings? Distributable earnings are a portion of a company’s accumulated realized profits, net of realized losses that are available for dividend distribution. As per the JSE listing requirements, Delta Property fund will be required to distribute 75% of their distributable earnings. The company retained 25% of earnings with intention to facilitate capital expenditure and working capital in the business, resulting in distribution of 55.39 cents per share being declared.

When looking at their distributable earnings decline, the company has reported that its decline was due to the fact that “Delta experienced its toughest and most challenging year since its listing. Slow pace of lease renewals from Department of public works, increased vacancies and higher cost of debt resulted in distributable earnings declining”.

Some of key performances indicators:

The weighted average cost of borrowing increased to 10.2% (2018: 9.2%) primarily due to higher interest rates on debt facilities refinanced. The higher interest rate in this case was mainly influenced by the vacancies in their buildings, policy uncertainties around bulk lease renewal and political uncertainties due to elections

The Loan to value ratio increased to 45.1% (2018: 41.3%), this was impacted negatively due to property portfolios losing values as a result of various reason including vacancies, higher borrowing costs.

The next twelve months:

The company is confident and expecting 2020 financial year to be the busiest year after elections and new cabinet been appointed which is welcomed by the large business community.

Delta property fund will be focusing on renewing it bulk leases and executing capex on building conditions. The company has listed multiple properties for disposals as part of its strategy to reduce its debt level and generate additional cash for capex and working capital.

The company will also be looking at filling existing vacancies across its portfolios as reported. Delta’s strategy will remain that of sovereign focused within reasonable period.

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