88 Field Street, Durban RESULTS PRESENTATION for the year ended 28 February 2018 www.deltafund.co.za Sleepy Hollow, Pietermaritzburg
88 Field Street, Durban AGENDA 01 Introduction, Updates & Highlights 02 Financial Review 03 Portfolio Review 04 Conclusion 05 Questions & Answers 06 Annexures
INTRODUCTION, UPDATES AND HIGHLIGHTS Sandile Nomvete Liberty Towers, Durban
INTRODUCTION TO DELTA Sovereign underpinned Market Most empowered fund JSE listed REIT capitalisation of Level 2 77.9% R4.3bn B-BBEE of revenue from Maintained on new sovereign tenants as at 28 February 2018 sector codes Dominant in Average property Assets under value of management of Pretoria & R109.6m R11.9bn Durban CBDs by 100% black-owned 2017: R101.6M asset manager RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2018 4
UPDATE ON DELTA Update on lease negotiations Leasing policy promulgated in January 2018, favouring empowered landlords Bulk lease negotiations progressing in earnest with renewals expected before December 2018 Proactive and pragmatic engagement from the DPW and the user departments in structuring solutions Year under review 21.6% of sovereign leases month-to-month (2017: 26.8%) Total exposure to sovereign leases: 77.9% (2017:76.4%) by rental income R941 million debt refinanced • Average debt facility expiry period contracting to 1.5 years (2017: 1.9 years) • Ongoing interactions with debt providers confirms WALE as a strong influencer of refinance terms & costs • LTV less impactful at 41.3% levels Recapitalisation Awaiting final funding terms from consortium Reduce debt funding, facilitate index inclusion and provide a platform for growth RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2018 5
UPDATE ON DELTA Capital recycling Disposal of non-strategic assets continued, portfolio down to 105 buildings from 112 as at 28 February 2017 Vacancies increased slightly Eskom consolidation in Sunninghill node Local supplier preferences impacting Free State portfolio Short-term performance Exogenous impacts to short-term performance and forecasts: • Clarity and implementation of DPW leasing policy • Successful implementation of recapitalisation transaction • Strong macro-economic growth that will support capital recycling and tenant demand RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2018 6
CORPORATE HIGHLIGHTS 2018 Distribution for FY2018 Distributable earnings Debtors well managed at for FY2018 97.24 R691.6 18.0 days cents per share million Vacancy at Renewed Concluded 93 144m 2 11.8% 53 774m² SAPOA: 11.2% of existing leases of new leases RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2018 7
FINANCIAL REVIEW Shaneel Maharaj Delta Towers, Durban
FINANCIAL HIGHLIGHTS 2018 Loan to value of Successfully refinanced Fixed debt of and settled 41.3% R941m 85.4% (Feb 2017: 41.5%) of debt facilities (Feb 2017: 85.1%) Debtors well managed at Property operating Interest cover ratio margin at 73.5% 2.4 18.0 days in tough economic environment (Feb 2017: 2.5) RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2018 9
FIVE YEAR REVIEW 2018 2017 2016 2015 2014 Revenue (R’000) 1 564 053 1 617 344 1 247 582 1 009 207 654 023 Net property income (R’000) 1 149 885 1 153 341 925 531 764 884 502 503 Finance costs (R’000) 482 179 470 580 412 713 316 380 151 149 Cost to income ratio - gross method 26.5% 28.8% 26.4% 26.0% 25.5% Cost to income ratio - net method 12.1% 12.4% 12.2% 10.2% 10.8% Investment property (R’000) 11 507 600 11 381 421 10 095 181 8 420 400 6 965 730 Investment in listed securities (R’000) 381 868 429 588 472 546 502 986 333 637 Borrowings (R’000) 4 952 690 5 099 227 5 094 310 4 508 565 3 197 742 Gearing level # 41.3% 41.5% 47.2% 49.9% 47.5% Weighted average interest rate 9.2% 9.2% 8.8% 8.1% 7.5% Average debt expiry period (years) 1.5 1.9 2.3 2.4 2.8 Average debt fix expiry period (years) 1.5 2.2 2.1 2.4 3.0 Fixed : floating debt (excluding revolvers) 85.4% 85.1% 83.5% 78.0% 36.0% Net asset value per share (exclusive of deferred tax) R10.06 R9.91 R10.61 R10.02 R9.28 RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2018 10
DISTRIBUTABLE INCOME STATEMENT- NON IFRS 28 Feb 2018 28 Feb 2017 29 Feb 2016 Net property income (excl. straight line accrual) 1,147,865 1,148,478 898,581 Administration expenses (53,329) (68,169) (82,744) Realised foreign exchange loss - - (39) Net finance costs (462,483) (443,412) (386,120) Dividend income - GRIT 35,666 37,990 36,779 Sundry income 20,287 6,215 7,266 Add back debt structuring fee - - 6,141 Antecedent interest 257 - 9,010 Distributable earnings paid/(retained) 3,378 (3,378) (912) Distributable income for the period 691,641 677,724 481,822 Number of shares in issue 711,844,486 710,632,182 533,097,436 Number of shares entitled to distribution 711,844,486 710,632,182 533,097,436 Distribution per share (cents) 97.24 97.24 90.79 RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2018 11
GROWTH IN DISTRIBUTIONS HISTORIC DISTRIBUTION PER SHARE (CENTS/SHARE) 7.1% 0% 8.0% H1 – Interim 15.6% H2 – Final 97.24 97.24 90.8 Total – Full year 84.1 72.7 7.1% (1.0)% 8.7% 7.1% 1.0% 7.2% 9.6% 23.1% 51.3 50.8 47.9 46.4 45.9 44.1 42.9 40.2 40.0 32.5 23.7 FY2013 H1 Aug-13 H2 Feb-14 FY2014 H1 Aug-14 H2 Feb-15 FY2015 H1 Aug-15 H2 Feb-16 FY2016 H1 Aug-16 H2 Feb-17 FY2017 H1 Aug-17 H2 Feb-18 FY2018 RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2018 12
DISTRIBUTABLE EARNINGS BRIDGE R’000 850,000 14 072 257 (2) (19 070) 3 378 15 896 (97 096) 800,000 96 483 750,000 691 641 700,000 677 724 650,000 600,000 550,000 500,000 450,000 400,000 H2 Feb 2017 Existing portfolio Admin cost saving Prior year retained Other income Antecedent Dividends received Net finance costs Disposals and non- H2 Feb 2018 earnings dividend (GRIT) core assets distributed RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2018 13
LIKE-FOR-LIKE NET PROPERTY INCOME (NPI) ANALYSIS Amount Description % (R’000) NPI Feb 2017 (excl. straight line rental income accrual) 1 148 478 Increased NPI from base portfolio held at 28 Feb 2017 96 483 8.4% NPI attributable to disposals and non-core assets FY17 (97 096) (8.5)% NPI Feb 2018 (excl. straight line rental income accrual) 1 147 865 (0.1)% Increased NPI from base portfolio held at 28 Feb 2017 96 483 NPI attributable to disposals and non-core assets FY18 (36 304) Like-for-like increase in NPI 60 179 5.2% RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2018 14
SUMMARISED STATEMENT OF FINANCIAL POSITION R’000 28 Feb 2018 28 Feb 2017 Change % ASSETS Non-Current assets 10 919 425 10 448 271 15,0% Investment property 10 535 000 10 053 921 15,8% Fair value of property portfolio 10 342 418 9 861 449 16,0% Straight line rental income accrual 192 582 192 472 4,3% Investment in associate 381 868 391 013 2.0% Other non-current assets 2 557 3 337 (81,2%) Current assets 543 256 583 563 12,4% Non-current assets held-for-sale 972 600 1 327 500 (6,0%) Total assets 12 435 281 12 359 334 12,2% EQUITY AND LIABILITIES Total equity 7 158 592 7 041 571 24,5% Liabilities 5 272 068 5 317 763 (0,8%) Non-current liabilities 2 720 230 4 142 269 14,7% Current liabilities 2 556 459 1 175 494 (32,8%) Total equity and liabilities 12 435 281 12 359 334 12,2% RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2018 15
NET ASSET VALUE BRIDGE RANDS 11.50 0.02 0.01 (0.98) 0.37 11.00 0.83 10.50 (0.11) 10.06 10.00 9.91 9.50 28 Feb 2017 Contribution from Fair value of Fair value of financial Contribution of Dividend paid Disposals 28 Feb 2018 operations investment property instruments & forex associate after gains impairment RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2018 16
DEBT SUMMARY As at 28 February 2018 Facility Type R’ m Weighted Ave. Rate Floating bank facilities 3,483 9.2% Fixed bank facilities 796 8.9% Revolving bank facilities 629 9.1% Total borrowings, net of accrued interest 4,908 9.2% Accrued interest 64 - Debt structuring fees (19) - TOTAL 4,953 Total fixed bank facilities 796 8.93% Interest rate swap contracts 2,720 7.83% Cross currency swaps 125 Libor + 2.89% Total fixed 3,641 Fixed % (excluding revolvers) 85.4% 9.2% RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2018 17
GRAPHICAL DEBT ANALYSIS SOURCE OF DEBT TOTAL: R4,908M DEBT CLASSIFICATION TOTAL: R4,908M 2.9% 12.8% Floating Bank Facilities (R3,483m) ZAR Banking Facilities (R4,767m) 16.2% Fixed Bank Facilities (R,796m) USD Banking Facilities (R141m) Revolving Bank Facilities (R,629m) 97.1% 71.0% FIXED DEBT BREAKDOWN TOTAL: FINANCIER SPLIT TOTAL: R4,908M R3,641M 2.9% 3.4% Nedbank (R3,213m) 13.8% Swap Contracts (R2,720m) Standard Bank (R,878m) 21.9% Fixed Banking Facilities (R,796m) 17.9% Investec (R,676m) Cross Currency Swaps (R,125m) Bank of China (R,141m) 65.4% 74.7% RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2018 18
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