Dipula Income Fund : GLOBAL CREDIT RATINGS (GCR) UPGRADES DIPULA’S CREDIT RATINGS TO BBB+(ZA)/A2(ZA) ON SOLID PERFORMANCE AND IMPROVED FINANCIAL FLEXIBILITY

12 August 2022

• Ratings reflect continued resilient performance and maintenance of solid credit protection metrics
  • LTV ratio remained between 37% and 40% for the period
• • Debt to EBITDA improved gradually from 4.8x in FY18 to 4.2x at H1 FY22
  • Net interest cover improved to 3.1x at FY21 and at H1 FY22
• Credit protection metrics are projected to trend at current levels at year-end FY22 and FY23.
• Financial flexibility improved through restructuring of dual share structure and easing of financial covenants
• GCR believes that although Dipula's portfolio is considered of moderate size, the portfolio's diversity supports a lower risk profile
• The stable outlook reflects GCR's view that Dipula should continue to display earnings resilience and that credit protection metrics will be consistent with expectations for the rating level

Friday, 12 August 2022 - South-African focused JSE-listed diversified REIT, Dipula Income Fund, today announced that its long- and short-term credit ratings were upgraded by GCR to BBB+(ZA) and A2(ZA) respectively, with a "stable" outlook. In terms of GCR's international scale rating, the improved long- and short-term ratings reflect high certainty of timely payment of short-term obligations and average credit quality relative to other issuers or obligations in the same country.

GCR noted that the upgrade to Dipula's ratings reflects the Group's continued resilient performance, which has allowed it to maintain solid credit protection metrics, whilst financial flexibility has been improved through the restructuring of its dual share structure and the easing of financial covenants.

On 07 April 2022, Dipula received overwhelming support from its shareholders to simplify its dual share capital structure into a single class of ordinary shares.

Izak Petersen, CEO of Dipula commented: "We are very pleased with the ratings upgrade. The simplification of our capital structure has paved the way to eliminate misalignment of interests between shareholders, which will allow Dipula to act on growth opportunities subject to sensible cost of capital relative to the return profile of the opportunities."

In addition to the simplified share structure, Dipula's improved credit rating was because of its solid operational performance and generation of stable operating profits throughout the Covid-19 pandemic.

The Group's operating margin has widened to 63.5% at 1H FY22, from around 62% during the pandemic, due to tight control over property and administrative costs. Looking ahead, GCR expects operating profit to gradually increase, despite inflationary pressures, with the operating margin remaining between 62% to 65%.
Key credit protection metrics were maintained at moderate levels, with the LTV ratio remaining between 37% and 40% over the review period (1H FY22: 38%). Debt to EBITDA has improved gradually from 4.8x FY18 to 4.2x at 1H FY22, whilst net interest cover improved to 3.1x at FY21 and 1H FY22. Credit protection metrics are projected to trend at current levels at year-end FY22 and FY23.

"Our hands on approach and the defensiveness of especially our retail portfolio is the reason for our solid performance over the years." Petersen noted.

According to GCR, further positive ratings could arise if Dipula successfully diversifies its funding sources and lengthens its debt maturity further, whilst securing, larger unutilised facilities to mitigate liquidity pressure.

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