JSE-listed real estate investment trust Dipula Income Fund increased its revenue by 3% year-on-year to R1.4-billion and its net asset value (NAV) by 2.1% year-on-year to R6.1-billion for the financial year ended August 31.

Distributable earnings, however, decreased by 6.9% to R514.2-million.

South Africa's significant increase in interest rates resulted in a 14.1% increase in the company's net finance costs and was the main contributor to the decrease in distributable earnings, said Dipula Income Fund CEO Izak Petersen during a briefing on November 15.

Dipula declared 90% of distributable earnings as dividends and declared a final gross dividend of 25.41c a share. The full year distributable earnings amounted to 56.96c a share.

Additionally, excluding residential, the company increased its tenant retention rate to 84%, up from 72% in the 2022 financial year, which had been a strategic focus over the past year, he said.

Further, the company's debt increased by 1% to R3.6-billion, up from R3.5-billion in the prior financial year, but gearing remained stable at 35.7%, down slightly from 35.9% in the 2022 financial year.

Dipula increased its portfolio value by 1.7% to R9.8-billion, up from R9.6-billion in the preceding financial year.

It posted an increase in its cost-to-income ratio, to 39.5%, up from 38% in the prior financial year, owing to the high global and local inflationary environment. The administration cost-to-income ratio increased to 4.4% from 3.4%.

The company concluded property disposals of R190-million at an aggregate yield of 9% during the year to the end of August, up from R56-million in the 2022 financial year. The proceeds are being recycled into value-enhancing property revamps, repaying debt and the roll-out of renewable energy and back-up power solutions, said Petersen.

"Dipula will continue to place focus on its sustainability efforts through the rolling out of solar, the installation of energy efficient lighting, water saving and refuse recycling,” he noted.

The group has started to roll out additional solar photovoltaic systems and enhance back-up power across the portfolio. A technical consultant has been appointed to assist in the process.

“Besides water savings and waste recycling, energy is a vital operational and environmental consideration for Dipula. We are currently finalising a strategic energy plan, including solar and broader backup power solutions, in addition to the measures already in place for our portfolio.

“The three-phased plan prioritises properties based on financial feasibility, optimising trading hours and tenants’ needs. Its implementation will begin in early 2024,” said Petersen.

The company had allocated R147-million to asset refurbishments during the 2023 financial year, funded primarily by recycled capital from asset sales. It has allocated a further R370-million for upgrades in the next 18 months.

“We will remain on the lookout for value-adding opportunities that will improve the liquidity and tradability of our shares,” he said.

Additionally, following its successful debt syndication programme, which is being implemented post year-end, the lower funding margins together with lower vacancy levels into the future will provide much-needed support in these tough trading conditions, he added.

The company grew net property income by 1.8%, based on a 3% increase in revenue and a moderate 3.4% increase in property-related expenses, despite the current high inflation and higher-than-inflation increases in administered costs, which are over-burdening property owners.

Dipula's board remains concerned about rapidly increasing administered costs and poor service delivery by government and municipalities. This is over-burdening property owners with additional costs and leading to value destruction, the company said in its results.

South Africa's weak economic performance will be further exacerbated by low economic growth underpinned by high rates of unemployment, lacklustre implementation of economic reforms, power shortages and deteriorating logistics infrastructure. Owing to the high volatility being experienced in the economy, the board has decided not to provide any guidance, the company noted.

Meanwhile, the company continues to roll out automation across its operations, and it has deployed four information technology modules so far as it builds its capability.

“With automation, we can move people dealing with reams of paper for financial, utility and procurement processes to the production parts of the business, and we are also looking at using smart systems for our leasing work going forward,” Petersen said.

He highlighted that the company's vacancy tool, which is also accessible by brokers, highlights current and potential future vacancies and their locations, with the rentals associated with each also updated from the company's other systems.

Further, Dipula uses a utility invoice management system that compares the amounts on utility bills with previous months and average consumption patterns and highlights any discrepancies. This has provided good benefits to the company, he added.

“Dipula will remain focused on keeping occupancies high, making our properties attractive for rental, unlocking value from our assets, keeping a tight grip on costs and rolling out our energy strategy.

“The higher occupancy levels and lower funding margins already in place will support us in tough trading conditions. We are well placed to navigate the expected economic headwinds and are poised to benefit from any economic improvement,” Petersen concluded.