JSE-listed diversified real estate investment trust Dipula Income Fund increased its distributable earnings by 0.1% to R275.7-million for the six months ended February 28.

It maintained a 100% pay-out ratio, resulting in 5% growth in A-share distributions to 61.97c a share and B-share distributions of 42.22c a share.

The South Africa-focused group reported results against a backdrop of what it termed “extremely challenging trading conditions,” driven by global factors, slow domestic economic growth and socioeconomic uncertainties prevailing in South Africa.

Dipula’s combined net asset value a share decreased slightly by 2% to R20.78 from R21.18 during the comparable half-year period in 2021. The group’s portfolio value remained stable at about R9-billion and comprised 186 properties with a total gross lettable area (GLA) of 925 251 m² down from 926 648 m² in the same period in 2021.

Contractual rental income across the portfolio increased by 0.6% to R541-million for the period, up from R538-million during the 2021 half-year period. Property-related expenses showed an inflationary increase of 5.8% to R232-million, up from R219-million during the comparable half-year period in 2021.

Net property income of R441-million, down from R457-million during the 2021 interim period, was reported.

Additionally, Dipula spent about R45-million on refurbishments and redevelopments during the period under review. A further R445-million has been earmarked for planned refurbishments over the next 18 to 24 months.

Dipula’s portfolio of convenience retail centres recorded an average growth in turnover of 14% period-on-period, the company said.

Further, disposals of R21-million were made during the period. An additional R35-million of disposals were awaiting transfer at the end of the interim period.

The company had total debt of R3.5-billion. The weighted average debt expiry profile was 2.17 years, and the aggregate hedge expiry period was 2.23 years. All debt was rand-denominated and 78%, up from 61% in 2021, of the group’s interest rate exposure was hedged.

Gearing for the period was 36.7%, up from 35.7% during the comparable 2021 interim period, and its interest cover ratio was 3.22 times, up from 3.18 times in the 2021 half-year period.

Further, during the interim period, debt facilities of R1.2-billion were renewed at a weighted average funding rate of 6%, for a weighted average period of three years. As at February 28, Dipula’s all-in weighted average cost of debt was 8.13%, up from 7.82% during the 2021 interim period.

Dipula had undrawn facilities of R131-million at period-end.

The group is also negotiating the renewal of R228-million of debt facilities, which expire in the current financial year, it added.

Meanwhile, the violent protest action during July 2021 impacted 12 of Dipula’s properties, 11 of which are now fully operational and trading. Dipula has received partial settlements from its insurers for the damaged properties and is in the final stages of agreeing the final settlement figures with the insurers.

Further, while Dipula reported no direct loss during the recent floods in KwaZulu-Natal, it expressed concern over the expected knock-on effects and human suffering that may follow from the catastrophe.

Going forward, Dipula expects the macroeconomic environment to remain extremely challenging in the short to medium term.

“In addition to uncertainty around the ongoing Covid-19 pandemic and low economic growth, ongoing load-shedding and dysfunctional municipalities add to the challenges faced by landlords,” said CEO Izak Petersen.

“We do not expect trading conditions to improve in the short term, but our team will strive to run the business as efficiently as possible and ‘sweat’ the assets to the very best of our ability,” he added.

Dipula's management will continue to optimise the balance sheet through sensible disposals of noncore assets and carefully planned refurbishments and upgrades funded from recycled capital, he noted.