Indluplace’s balance sheet management underpins positioning

Having entered the Covid-19 pandemic in a strong financial position, Indluplace, on track to deliver earnings in line with guidance, announced an 8,8% decline in distributable income per share for the six months ended 31 March 2020 to 34,17 cents from 37,49 cents in the prior comparable period.

The environment changed dramatically since the company entered the second half of its current financial year and therefore withdrew guidance and postponed its interim dividend payment as per the Trading Statement released on 23 April 2020.

The bolstering of  its head office team with highly skilled and experienced individuals during 2019 served the company well. Extremely proud of the team, Carel de Wit, CEO of Indluplace commented: “I am very proud of the way the team has adapted to the unprecedented circumstances. Everyone has been set up to work from home prior to entering the lock down period and their ongoing commitment and drive towards innovation is highly appreciated.”

With its focus on providing homes for working families, the Indluplace portfolio played a vital role during lock down. The basic need for accommodation remains a constant and the company’s occupation rate going into lock down was at its best levels for years. Vacancies improved from 8,5% to 5,5% during the period under review due to the excellent progress made at the letting of units at Highveld View, now over 95% let. The remainder of the portfolio has also performed well and remains stable.

“Some tenants have been negatively impacted by the weight of the impact the virus has had on the South African economy and their employers having suspended operations, unable to continue to pay salaries. Despite this collections remained relatively good during April and May thus far. Conscious of the impact on our  tenants’ livelihoods and financial circumstances, the team has adopted innovative approaches to work with tenants on a case-by-case basis to structure payment plans,” said De Wit.

Bad debts prior to lock down was stable at around 1% but the lock down is expected to have a substantial impact on this. The approach to credit control had to be softened with the tenants that have been affected while remaining firm with tenants able to pay. Paying rent remains a priority for most tenants and deposits are still intact.

The company’s balance sheet remains resilient and LTV is at a relative conservative level of 34,7% with total debt amounting to R1,5 billion at a weighted average cost of debt of 8.99%. With 67% of drawn down debt hedged, Terry Kaplan, Financial Director of Indluplace, is comfortable that the company is well positioned to weather the storm with available cash facilities of R93 million and an interest cover ratio of 2.5.

The safety of the company’s staff and tenants have been and remain a core focus, with the preservation of jobs a driving force. Indluplace recognizes that everyone find themselves in very uncertain and stressful circumstances. The company have and continue to work closely with the SMME’s relying on its support to ensure businesses survive during this time and to keep operations at building level as normal as possible.

“We find ourselves in a very uncertain and ever-changing environment with regulations unclear at the best of times, but I am positive that the company will navigate through this with the protection of all stakeholders paramount. 

“The pandemic moved us even closer to our property managers and their operations. We have increased communications with our internal team, property managers, funders and other stakeholders and the current environment has given us the opportunity to fast track some processes that were underway pre-lockdown.

“We expect vacancy levels to increase in the short-term but are confident that the demand for value-for-money, professionally managed, rental residential buildings offering a diversity of unit types, buildings, locations and rentals, contributing positively to its areas of operation, remains strong. We remain convinced of the importance, relevance and long-term viability of the asset class and therefore our business,” concluded De Wit.

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