Release Date: June 03, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Delta Property Fund Ltd (JSE:DLT, Financial) successfully disposed of ZAR406 million of non-core assets during the financial year, aligning with their strategy to strengthen the balance sheet.
- Net operating income increased by 10.3% to ZAR721.5 million, driven by strategic initiatives such as cost optimization and disposal of non-core assets.
- The vacancy rate in the core portfolio improved significantly, dropping from 24.2% to 18.4%, indicating effective leasing efforts.
- Delta Property Fund Ltd (JSE:DLT) reported a significant increase in net operating profit, maintaining strong cash generation capabilities.
- Support from funders remains strong, with successful renewal of maturing debt facilities, indicating confidence in the company's turnaround strategy.
Negative Points
- Revenue contracted marginally to ZAR1.1 billion due to rental reversions and a significant vacancy at SARS Bellville.
- The weighted average rental across the portfolio declined due to rental reversions, impacting overall revenue.
- The aggregate selling price of properties during the year was ZAR30.8 million lower than book value, representing a 7.6% discount to fair value.
- The fair value adjustment losses and higher expected credit losses contributed to a net loss of ZAR104.2 million for the year.
- Trade receivables increased to ZAR155 million, with a provision for bad debts representing approximately 40% of trade receivables, indicating collection challenges.
Q & A Highlights
Q: What is your forecasted impact on net asset value per share post non-core disposals?
A: The forecasted NAV post-disposal depends on how these disposals are executed. If disposals are at market value, the NAV will remain the same. However, if discounts are accepted, it will impact the NAV. We haven't done a detailed exercise on this yet.
Q: Could you please clarify the Covenant ICR? How do your lenders define this metric?
A: The Covenant ICR is the extent to which operating income can cover interest expenses. Banks have indicated that as ICR improves, they gain more comfort in our ability to service debt, which could lead to more favorable terms in the future.
Q: Can you provide more information on the disposal plan? Will you do more auctions?
A: We have decided not to conduct more auctions unless there are compelling reasons, as auctions tend to result in value loss. We are actively discussing offers and will proceed with disposals when offers are compelling.
Q: What is your strategy regarding your holdings in Grit? How much can you realistically realize from this investment?
A: We hold a 3% stake in Grit, and our strategy is to dispose of this investment. The valuation has declined significantly, and while we aim to sell, it is not easy due to market conditions. The disposal will follow governance and require board and funder approval.
Q: Are there any pending actions regarding the legacy governance challenges?
A: From our end, the case is closed unless further legal actions are pursued by the involved parties. The investigation started in December 2020, and the outcomes have been pronounced.
Q: Is there any chance of converting some of your properties to residential?
A: We do not have the mandate or cash flow to convert properties to residential. Additionally, our loan agreements prohibit such conversions without specific bank approvals.
Q: Are you still looking at reducing your geographic footprint, and which areas will be part of the core portfolio?
A: We are focusing on disposing of properties with low ICR. We are exiting Bloemfontein and Eastern Cape, and will have a smaller footprint in Johannesburg and Pretoria.
Q: Do you have a target weighted average lease expiry?
A: Yes, our target is 36 months. In the short term, we aim to move from the current position to 24 months, and ultimately to 36 months, as funding is linked to lease expiry.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
