| Tue 15 Nov 2011, 17:18 | | DIA/DIB - Dipula Income Fund Limited - Reviewed condensed consolidated results |
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DIA DIB
DIF
DIA/DIB - Dipula Income Fund Limited - Reviewed condensed consolidated results
for the year ended 31 August 2011
DIPULA INCOME FUND LIMITED
(Incorporated in the Republic of South Africa
(Registration number 2005/013963/06)
JSE code for A-linked units: DIA
ISIN for A-linked units: ZAE000158317
JSE code for B-linked units: DIB
ISIN for B-linked units: ZAE000158325
("Dipula" or "the company", and together with its
subsidiaries, "the Fund" or "the group")
Reviewed condensed consolidated results
for the year ended 31 August 2011
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited/
Reviewed IAS 12 Restated
Year ended Year ended
31 August 31 August
2011 2010
R`000 R`000
REVENUE
Property portfolio 110 171 96 358
Rental income 106 647 93 938
Straight-line rental income accrual 3 524 2 420
Total revenue 110 171 96 358
Property expenses (27 394) (18 847)
Administration and corporate costs (4 691) (3 878)
Net operating profit 78 086 73 633
Changes in fair values of investment properties 3 350 32 878
Profit from operations 81 436 106 511
Net finance charges (140 573) (72 302)
Finance charges (140 895) (72 889)
Finance income 322 587
(Loss)/Profit before debenture
interest and taxation (59 137) 34 209
Debenture interest (5 096) -
(Loss)/Profit before taxation (64 233) 34 209
Taxation 9 771 (5 013)
(Loss)/Profit for the year after taxation (54 462) 29 196
Other comprehensive income - -
Total comprehensive (loss)/income for the
year attributable to equity holders (54 462) 29 196
Reconciliation of (loss)/earnings, headline
(loss)/earnings and distributable earnings
(Loss)/Profit for the year attributable to
equity holders (54 462) 29 196
Debenture interest 5 096 -
(Loss)/Earnings (49 366) 29 196
Change in fair value of properties
(net of deferred taxation) (3 006) (28 275)
Change in fair value of properties (3 350) (32 878)
Deferred taxation 344 4 603
Headline (loss)/earnings attributable to
linked unitholders (52 372) 921
Straight-line rental income accrual
(net of deferred taxation) (2 537)
Straight-line rental income accrual (3 524)
Deferred taxation 987
Deferred taxation asset raised on tax
losses and doubtful debt provisions (11 102)
Debt breakage costs 71 107
Distributable earnings attributable to
linked unitholders 5 096
Number of A-linked units in issue 105 532 393 *
Number of B-linked units in issue 105 532 393 *
Total number of linked units 211 064 786 *
Weighted average number of A-linked
units in issue 4 336 948 *
Weighted average number of B-linked
units in issue 4 336 948 *
Basic loss per share (cents) (627,88) *
Headline loss per share (cents) (662,54)
Basic loss per A-linked unit (cents) (560,60) *
Basic loss per B-linked unit (cents) (577,66) *
Headline loss per A-inked unit (cents) (595,26) *
Headline loss per B-linked unit (cents) (612,32) *
Distributable earnings per A-linked unit (cents) 2,77 *
Distributable earnings per B-linked unit (cents) 2,06 *
* The company had no linked units in issue during the 2010 financial year.
Instead 100 ordinary shares of R1 each were in issue. Based on this fact basic
earnings per share was R291 960 per share and headine earnings per share was R9
210 per share which cannot be compared to the current year`s results as a result
of the group`s restructuring.
The company does not have any dilutionary instruments in issue.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited/ Audited/
Reviewed IAS 12 Restated IAS 12 Restated
31 August 31 August 31 August
2011 2010 2009
R`000 R`000 R`000
ASSETS
Non-current assets 2 155 581 809 262 773 610
Investment property 2 107 099 809 262 773 610
Goodwill 48 482 - -
Current assets 46 338 8 800 9 722
Trade and other receivables 21 078 7 359 3 093
Cash and cash equivalents 25 260 1 441 6 629
Non-current assets held for sale
Investment property held for sale 21 400 - -
Total assets 2 223 319 818 062 783 332
EQUITY AND LIABILITIES
Equity 473 811 100 421 71 225
Stated capital 427 852 - -
Reserves 45 959 100 421 71 225
Non-current liabilities 1 677 216 705 615 699 076
Debentures 900 629 - -
Interest-bearing liabilities 759 500 397 629 397 629
Loans from related parties - 290 116 288 594
Deferred taxation 17 087 17 870 12 853
Current liabilities 71 182 12 026 13 031
Trade and other payables 66 086 12 026 13 031
Unitholders for distribution 5 096 - -
Non-current liabilities held
for sale
Investment property held for
sale - deferred taxation 1 110 - -
Total equity and liabilities 2 223 319 818 062 783 332
Net asset value per A-linked
unit (excluding deferred
taxation) (cents) 659,81
Net asset value per B-linked
unit (excluding deferred
taxation) (cents) 659,81
Net asset value per A-linked
unit (cents) 651,19
Net asset value per B-linked
unit (cents) 651,19
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Stated capital/ Fair value
Share capital reserve
R`000 R`000
Balance at 31 August 2008 as previously reported - 57 296
Restatement of opening balances - IAS 12 adoption - 24 275
Balance at 31 August 2009
(Restated) - 81 571
Total comprehensive income for the year - -
- As previously reported - -
- Adoption of IAS 12 - -
Transfer of capital items to fair value reserve - 30 018
- As previously reported - 20 225
- Adoption of IAS 12 - 9 793
Balance at 31 August 2010
(Restated) - 111 589
Issue of linked units 469 156 -
Share issue expenses (18 094) -
Treasury shares (23 210) -
Total comprehensive loss for the year - -
Transfer of capital items to fair value reserve - 5 306
Balance at 31 August 2011 (Reviewed) 427 852 116 895
Accumulated Total
profit/(loss) equity
R`000 R`000
Balance at 31 August 2008 as previously reported (9 098) 48 198
Restatement of opening balances - IAS 12 adoption (1 248) 23 027
Balance at 31 August 2009
(Restated) (10 346) 71 225
Total comprehensive income for the year 29 196 29 196
- As previously reported 20 465 20 465
- Adoption of IAS 12 8 731 8 731
Transfer of capital items to fair value reserve (30 018) -
- As previously reported (20 225) -
- Adoption of IAS 12 (9 793)
Balance at 31 August 2010
(Restated) (11 168) 100 421
Issue of linked units - 469 156
Share issue expenses - (18 094)
Treasury shares - (23 210)
Total comprehensive loss for the year (54 462) (54 462)
Transfer of capital items to fair value reserve (5 306) -
Balance at 31 August 2011 (Reviewed) (70 936) 473 811
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Reviewed Audited
Year ended Year ended
31 August 2011 31 August 2010
R`000 R`000
Cash flows from operating activities (62 319) (2 356)
Cash generated from operations 78 254 69 947
Net finance costs (140 573) (72 303)
Cash outflows from investing activities (517 840) (354)
Cash inflows/(outflows) from financing activities 603 978 (2 478)
Net movement in cash and cash equivalents 23 819 (5 188)
Cash and cash equivalents at the beginning
of the year 1 441 6 629
Cash and cash equivalents at the end of the year 25 260 1 441
SEGMENTAL INFORMATION
For the year ended 31 August 2011
Extracts from the
statement of
comprehensive income Retail Industrial Offices Total
R`000 R`000 R`000 R`000
Rental income 57 481 8 678 40 488 106 647
Property expenses (12 643) (4 455) (10 296) (27 394)
Net property income 44 838 4 223 30 192 79 253
Extracts from the statement
of financial position
Investment property 1 124 730 332 300 650 069 2 107 099
For the year ended 31 August 2010
Extracts from the statement of
comprehensive income Retail Industrial Offices Total
R`000 R`000 R`000 R`000
Rental income 48 240 5 870 39 828 93 938
Property expenses (9 029) (790) (9 028) (18 847)
Net property income 39 211 5 080 30 800 75 091
Extracts from the statement of
financial position
Investment property 417 816 47 371 344 075 809 262
NOTES
1. Basis of preparation
The reviewed condensed consolidated financial statements have been prepared in
accordance with the requirements of International Financial Reporting Standards,
the AC 500 series of interpretations, IAS 34: Interim Financial Reporting, the
JSE Listings Requirements and the requirements of the South African Companies
Act, 2008.
The accounting policies adopted are consistent with those applied in the prior
periods except for the recognition of deferred tax. In December 2010 the IASB
released amendments to IAS 12 effective from 1 January 2012. These amendments
impact on the rate at which deferred tax is recognised specifically on the fair
value movement of the building component of investment property as it
establishes a presumption that it will be recovered through disposal and hence
will attract deferred tax at the capital gains tax rate. Dipula has elected the
early adoption of these amendments and applied them retrospectively. It is the
view of the Board that the adoption of this policy results in more accurate and
meaningful information.
The early adoption had the following effect on the August 2010 and August 2009
results:
2010 2009 Prior
R`000 R`000 R`000
Deferred tax liability - decrease (31 754) (23 023) (18 167)
Reserves - increase 31 754 23 023 18 167
Deferrred tax expense - decrease (8 731) (4 856) (18 167)
Profit for the year - increase 8 731 4 856 18 167
Further details relating to the impact of the early addoption of the IAS 12
amendments on reserves can be seen in the statement of changes in equity.
PKF (Jhb) Inc. have issued their unmodified review opinion on the group
financial statements for the year ended 31 August 2011, which is available for
inspection at the company`s registered office. These results have been prepared
by the Financial Director, Brigitte de Bruyn CA(SA).
2. Summary of financial performance
Audited/
Reviewed IAS 12 Restated
Year ended Year ended
31 August 31 August
2011 2010
Distribution per A-linked unit (cents) 2,77 N/A
Distribution per B-linked unit (cents) 2,06 N/A
A-linked units in issue 105 532 393 N/A
B-linked units in issue 105 532 393 N/A
Net asset value per combined
linked unit (cents)* 1 302,38 N/A
Net asset value per A-linked unit (cents) 651,19 N/A
Net asset value per B-linked unit (cents) 651,19 N/A
Gearing ratio** 34,2%
* Net asset value includes total equity attributable to equity holders and
linked debentures.
**The gearing ratio is calculated by dividing interest-bearing liabilities,
excluding linked debenture liabilities, by total assets.
3. Business combinations
Dipula acquired Mergence Africa Property Fund (Pty) Limited which owns 51
properties with effect from 1 August 2011. In addition, Dipula acquired Asakhe
Realty Investment Fund (Pty) Limited which owns 19 properties, with effect from
17 August 2011.
Details of the net assets acquired are as follows:
R`000
Investment properties 899 900
Assets held for sale 21 400
Trade and other receivables 5 096
Net cash and cash equivalents 9 381
Trade and other payables (15 007)
Non-current interest-bearing liabilities (340 333)
Related party loans (414 070)
Deferred taxation (10 098)
Total net assets acquired 156 269
Goodwill 48 482
Purchase consideration payable 204 751
Settled as follows:
Cash 134 737
Vendor loan raised (current liability) 28 158
Shares and debentures 41 856
204 751
The acquired businesses contributed revenues of R9,55 million and net profit of
R15,62 million, including the effect of fair value adjustments but excluding the
effect of debt breakage costs paid by the group for the period under review.
These amounts have been calculated using the group`s accounting policies
together with consequential tax effects.
If the acquisitions had occurred on 1 September 2010, the contribution to group
revenue and net profit after tax would have been R101,47 million and R29,2
million, respectively. The net profit after tax has been calculated including
the effect of fair value adjustments but excluding the effect of debt breakage
costs paid and income relating to a loan forgiven.
4. Payment of final distributions
The Board has approved and notice is hereby given of final cash interest
distributions (distribution number 1) of 2,77 cents per A-linked unit and 2,06
cents per B-linked unit for the year ended 31 August 2011 in accordance with
the abbreviated timetable set out below:
2011
Last date to trade cum distribution Friday, 2 December
Linked units trade ex distribution Monday, 5 December
Record date Friday, 9 December
Payment date Monday, 12 December
Linked unit certificates may not be dematerialised or rematerialised between
Monday, 5 December 2011 and Friday, 9 December 2011, both days inclusive.
DIRECTORS` COMMENTARY
INTRODUCTION
Dipula listed on the JSE Limited on 17 August 2011. The asset management company
of Dipula is 100% black owned. Management has a sizeable stake in the Fund.
The Fund`s units in issue comprise A- and B-linked units, with A-linked units
having a preferential claim to earnings, whilst the B-linked units receive the
balance of the earnings.
The Dipula A- and B-linked units were issued to accommodate investors with
different risk profiles and appetites. The proportion of A- and B-linked units
(and current market capitalisation) is roughly 63% and 37%, respectively. The
cover ratio for the A-linked units, which is calculated as total distributable
income divided by the distribution paid to the A-linked unitholders, is expected
to be 175% for 2012. The A-linked unit distributions will grow at 5% per annum
from 2013 for a period of five years and at the lower of 5% and CPI thereafter.
The Fund is currently trading at a premium of approximately 4% to its net asset
value.
DISTRIBUTABLE INCOME
The forecast for the year ending 31 August 2011 which was included in the
prospectus dated 28 July 2011, assumed that the listing of Dipula and the
various acquisitions ("the acquisitions") detailed in the prospectus would be
effective on 1 August 2011. The listing and the acquisitions were in fact only
implemented on or around 17 August 2011, with the result that the distribution
for the period ended 31 August 2011 comprises the distributable income of the
enlarged Dipula group for a period of 15 days up to its year-end 31 August 2011.
Accordingly, a revised forecast reflecting the results since the actual listing
date has been presented as a basis for comparison. The revised forecast has not
been reviewed or reported on by the group`s auditors.
Reviewed
Comparison of results for
actual distribution to revised the year ended
forecast distribution 31 August Revised Prospectus
2011 forecast forecast
R`000 R`000 R`000
Property portfolio rental income 106 647 103 343 110 552
Property expenses (27 394) (24 710) (26 241)
Administration and corporate costs (4 691) (5 344) (5 348)
Net interest paid (excluding debt
breakage costs) (69 466) (68 331) (68 716)
Profit before debenture interest
and taxation 5 096 4 958 10 247
Debenture interest (5 096) (4 958) (l0 247)
Distribution per A-linked unit (cents) 2,77 2,69 5,56
Distribution per B-linked unit (cents) 2,06 2,01 4,15
In terms of the debenture trust deed, A-linked unitholders are entitled to
approximately 57% of the total distributable income for the period ending 31
August 2012, with B-linked unitholders being entitled to the balance of the
distributable income for that period. This ratio has been applied to the
15-day period of the 2011 results. This translates to distributions for the
year ended 31 August 2011 of 2,77 cents and 2,06 cents per A- and B-linked
unit, respectively.
The improved distributable income is mainly as a result of marginally better
rental performance of the portfolio.
PROPERTY PORTFOLIO
The Fund holds a diversified property portfolio of properties located throughout
South Africa. The property portfolio was valued in aggregate at R2,1 billion at
28 February 2011 by independent valuers and consists of 175 properties with an
effective GLA of 436 629 m2.
The property portfolio has a retail bias, with 52% of the portfolio invested in
retail (by gross rental revenue) with offices and industrial at 32% and 16%,
respectively; 78% of the properties (by gross rental revenue are situated in
Gauteng. The Fund`s diversification lowers risk for the Fund and investors and
will be retained as a strategy.
FUNDING
Dipula is currently achieving an all-in blended rate of funding of 8,59% and has
fixed interest debt of R506 million for four years and R100 million for five
years, respectively.
The floating facility of R153 million expires in about five years. There are no
expiring loan facilities until 2015.
DIRECTORATE
The Board of Directors comprises the following members:
- Zanele Matlala (Chairperson),Izak Petersen (Chief Executive Officer), Brigitte
de Bruyn (Financial Director), Brian Azizollahoff (independent non-executive
director) and Professor Eltie Links (independent non-executive director) who
were appointed on 29 May 2011;
- Younaid Waja (independent non-executive director) who was appointed on 6 June
2011; and
- Saul Gumede (executive director) who was an existing director and was
appointed on 13 March 2006.
PROSPECTS
The performance of the property market is dependent on the performance of the
economy as a whole. The South African economy is expected to grow within the
range 3% to 4% whilst CPI inflation is experiencing upward pressure currently.
We are concerned about the impact of the increasing electricity costs as well as
municipal rates on net rentals achieved.
In spite of the economic concerns highlighted, Dipula still expects to achieve
the distributions for the year ending 31 August 2012 which were forecast in its
prospectus dated 28 July 2011.
Dipula is considering various portfolio-improving acquisitions whilst preserving
income and will seek to trade out of non-core properties. Prospects for
acquisitive growth are considered good in the short to medium term.
By order of the Board
Johannesburg
15 November 2011
Directors: ZJL Matlala (Chairperson), IS Peterson (CEO), BH Azizollahoff*#,
B de Bruyn (FD), NS Gumede, E Links*, Y Waja*
* Independent non-executive #British
Registered office: 2 Arnold Road, Rosebank, 2196. PO Box 1731, Parklands, 2121
Transfer secretaries: Link Market Services South Africa (Proprietary) Limited
Sponsor: Java Capital
Company secretary: Probity Business Services (Proprietary) Limited
Website: www.dipula.co.za
Date: 15/11/2011 17:18:04 Produced by the JSE SENS Department.
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