Dipula has reported a 4% decline in full-year distributable earnings, as a 15% increase in property-related expenses weighed on its operations.
The diversified real estate investment trust (Reit), which owns a portfolio of retail, office, industrial and residential rental assets throughout SA with the majority of its assets located in Gauteng, reported distributable earnings per share of 54.4c for the year ended August, from 56.96c a year ago.
Higher municipal expenses, increased net finance costs, and prior year disposals contributed to a 4% decline in distributable earnings, which totalled R496m from R514m a year ago, it said on Wednesday.
Revenue rose by 7% to R1.5bn despite negative reversions in the government-tenanted office portfolio and revenue losses from property disposals in the previous year.
The group’s performance was adversely affected by a 15% increase in property related expenses to R553m, primarily driven by above-inflation municipal tariff hikes, an increase in maintenance related spending, higher tenant installation costs due to improved leasing activity and rising labour costs in third party service contracts.
Additionally, municipal costs were higher due to non-recurring credits and a substantial reduction in vacancies late in the 2023 financial year, which led to higher utility consumption in previously vacant properties.
Net property income rose 2% to R920m. The dividend per ordinary share amounted to 48.95c from 51.26c a year ago.
Dipula said that while the long negative cycle for SA real estate was not yet over, there were signs of improving fundamentals.
“Recent research reports show stronger leasing performance across office, retail, industrial, and residential properties. With inflation declining and a more stable electricity grid, we anticipate rental growth and a slowdown in cost increases,” it said.
These developments were expected to boost consumer and business confidence, potentially leading to increased investment in the economy and strengthening property fundamentals, Dipula said, despite the ongoing challenges property owners faced due to failing municipalities.
Dipula’s retail and industrial portfolios are expected to continue to perform robustly, while the office portfolio gradually recovers in line with recent sector improvements. The board anticipates distributable earnings growth of at least 5% for the year ahead.
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