Delta Property Fund’s profit rose 71.86% to R50.7m as the group pressed ahead with its disposal programme, tightened debt management, controlled costs, renewed key leases and reduced vacancies despite ongoing debt restructuring.
The group, which leases most of its properties to government tenants, also reported a full collection rate of 100% for the period, up from 95.1% a year earlier, the group said in its half-year results to end-August.
“Although the B- and C-grade commercial office market remains exceptionally competitive, we’re encouraged to see solid progress in executing our strategic priorities as part of Delta’s turnaround,” the group said.
Revenue for the period dipped 0.9% to R578.2m, reflecting a limited number of vacancies, rent reversions, and the effect of properties sold under the disposal programme, it said.
Funds from operations rose 13.6% to R65.4m, while distributable earnings per share increased by the same margin to 9.2c.
Letting activity remained firm, with the group renewing 43 leases covering 47,943m² at an average term of 1.5 years, while securing new leases for a further 14,674m² on one-year terms.
Portfolio vacancies narrowed to 29.7% from 31.9% due to disposals of noncore assets and new leases. Excluding properties held for sale, vacancies dropped to 18.7%, underscoring the gains from targeted disposals and sustained leasing momentum.
Cash generated from operations rose 7.1% to R319.2m. This was used to cover finance costs of R201.3m, taxes of R34.5m, capital expenditure of R42.2m, lease liabilities of R2.6m, and net debt repayments of R41m, it said.
On its debt restructuring, the group continued working with lenders to secure better pricing and extend maturities. Total interest-bearing debt fell to R3.7bn from R3.9bn, driven by ongoing disposals and scheduled amortisation.
Capital repayments increased to R143.3m from R139.8m, driven by R92.2m generated from property disposals and a further R51m in amortisation payments.
Net proceeds of R92.3m from the disposal of noncore properties were applied directly to debt.
The group’s interest cover ratio improved to 1.5 times, up from 1.4 times in the previous financial year, while the loan-to-value ratio eased from 59.5% to 58.4%.
“Finance costs fell from R237.4m to R211.4m, supported by interest rate cuts and our continued capital repayment efforts. Our weighted average cost of funding now stands at 10.5%, down from 11.4% in the prior period,” the group said.
Looking forward, Delta said it expects the domestic economy to improve on rising investor confidence and a stabilising power grid but cautioned that B-grade office demand is likely to remain weak in the near term.
“Even so, the broader environment is becoming more supportive of growth, and we believe this will translate into a healthier operating backdrop over the medium term,” it said.
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