Wrap Text
Condensed audited results for the year ended 31 March 2016
Vukile Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2002/027194/06)
JSE share code: VKE
ISIN: ZAE000056370
NSX share code: VKN
(Granted REIT status with the JSE)
(Vukile or the group or the company)
Condensed audited results for the year ended 31 March 2016
HIGHLIGHTS
- 7.0% increase in the second half dividend and 146.35 cents per share for the full year
- Vacancies reduced to 3.9% of GLA
- Successful R760 million offshore investment through acquiring a 26.1% stake in Atlantic Leaf Properties Limited
- Acquisition of four retail shopping centres at a total cost of R1.2 billion
- Acquisition into two regional mall developments at a cost of R600 million
- Successful equity raise of R1.1 billion in May 2015
- Successful refinance of R2 billion debt during the reporting period
- Gearing ratio of 29.5% with 86.4% of debt hedged
- Achieved Level 3 B-BBEE rating
1. NATURE OF OPERATIONS
The group is a long-term investor in a retail-focused property portfolio with strong contractual cash flows for
sustainability and capital appreciation.
2. SIGNIFICANT EVENTS AND TRANSACTIONS
During this reporting period, the following significant transactions were effected:
1. The raising of R1.1 billion equity by way of an equity issuance of R250 million to Opiconsiva Trading 302 (RF)
(Pty) Ltd (Encha) and an equity issuance of R850 million to institutional investors.
2. The refinancing of bank debt, DMTN corporate bonds and commercial paper amounting to R2.0 billion.
3. The acquisition of Moruleng Mall (80%), Batho Plaza, Bedworth Centre and the Nonesi Mall at a total cost of
R1.2 billion, 33% of Thavhani Mall and 25% of Springs Mall, both under development, at a total cost of R600 million.
4. The acquisition of 26.1% of Atlantic Leaf Properties Limited (Atlantic Leaf), partly financed by raising an
£18 million loan.
3. SUMMARY OF FINANCIAL PERFORMANCE
The directors of Vukile are pleased to report that the dividend for the six months ended 31 March 2016 has increased
by 7.0% to 83.126 cents per share. The dividends for the full year rose by a similar 7.0% to 146.348 cents per share.
The group's net profit available for distribution amounted to R996.3 million for the year ending 31 March 2016,
which represents an increase of 28.7% over the comparable period.
The proposed total dividend is made up as follows:
Rm % Cents per
share
First 408.5 43.1 63.222
Second(1) 538.4 56.9 83.126
Total 946.9 100 146.348
(1) based on shares in issue at 31 March 2016.
An additional dividend of R48.2 million was paid in June 2015 following the R1.1 billion share issuance in April 2015.
The shareholders who participated in the issuance were entitled to receive the March 2015 second half dividend.
2016 2015 %
March March change
Earnings (Rm) 1 586 1 500 5.7
Net asset value per share (cents) 1 842 1 716 7.3
Loan to value ratio (%)(I) 31.9 29.0 10.0
Loan to value ratio net of cash (%)(Il) 26.9 26.0 3.5
Gearing ratio (%)(IIl) 29.5 26.6 10.9
(I) Based on directors' valuations of the group's portfolio at 31 March 2016.
(II) The gearing ratio is calculated by dividing total interest-bearing borrowings by total assets.
(IlI) Based on (i) above less cash net of cash held on deposit from tenants.
The simplified income statement presented below does not fully comply with IFRS. In order to facilitate the comparison
with prior years, this income statement excludes Synergy Income Fund Limited's (Synergy) results on a consolidated basis
and merely includes income generated from the investment in Synergy.
Calculation of distributable earnings 2016 2015 Variance Note
March March Group
Group Group %
R000 R000
Net profit from property operations excluding
straight-line income adjustment 1 103 392 961 542 14.8
Income from asset management business 15 225 24 692 (38.3) (I)
Dividends received from Fairvest 7 626 26 115 26.5 (II)
Dividends received from Synergy 33 189 33 144 99.2 (II)
Interest and other income 90 083 24 851 >100
Corporate and administrative expenses (81 055) (69 742) (16.2)
Cost of acquiring a business combination (Clidet) (1 230) (2 778) 55.7
Finance costs (309 618) (260 915) (18.7)
Taxation (including deferred tax on timing differences) (9 419) (26) (100)
Shares issued cum dividend 63 024 33 262 -
Dividends receivable from Fairvest 25 408 - - (II)
Dividends receivable from Synergy 32 847 - (II)
Dividends receivable from Atlantic Leaf 20 511 - -
Costs of acquiring business combinations 1 230 2 778 -
Pre-acquisition dividends - 1 293 -
Project management fees receivable from Sanlam 8 000 - - (III)
999 213 774 216
Less: non-controlling interest attributable to
Clidet No 1011 (Pty) Ltd (Clidet) (2 901) -
Available for distribution to Vukile shareholders 996 312 774 216 28.9
Notes
(I) The asset management fees and Vukile's net property management fees of R13.2 million earned on the management of
Synergy's portfolio has been reinstated in property expenses and as income from the asset management business -
reversed previously on consolidation.
(II) Combined with dividends receivable post 31 March 2016 in respect of the year ended 31 March 2016. Previously, interest
on linked debentures was accrued at year-end and formed part of distributable income.
(III) These fees represent cash receipts available for distribution, although in terms of IFRS requirements these fees were
offset against the loss realised on the sale of the asset management business in the prior year.
Property portfolio results
Net profit from property operations increased by R142 million, from R962 million to R1.1 billion. During the past
financial year the property portfolio performed very well in a difficult economic environment. Larger national and listed
tenants continued to trade reasonably well while smaller independent tenants in the retail and industrial sectors came
under pressure, resulting in an increase in outstanding rentals and legal balances. Against this backdrop, the average
escalation on expiry rentals on the total portfolio of 9.1% is exceptionally positive. The retail sector outperformed the other
sectors with a tremendous escalation on expiry rentals of 12.3% versus industrial at 5.0% and offices at 4.4%. Vacancies
measured as a percentage of gross lettable area on the total portfolio, including Synergy, reduced from 4.6% to 3.9%.
Office vacancies were reduced considerably from 10.2% to 5.0%, retail vacancies increased marginally from 3.4% to 3.5% and
industrial vacancies increased from 1.9% to 4.3%. The expiry profile improved substantially with approximately 33% of
leases due to expire in 2020 and beyond, up from 18% in the prior year. Despite excessive increases in utilities and rates
and taxes, the ratio of net recurring cost to property revenue was contained at 15.8% versus 15.5% in the prior year.
Gross rental receivables - tenant arrears
Tenant arrears amounted to R64.0 million at 31 March 2016 or 3.05% of the gross rental income, a reduction from the
prior year where tenant arrears equated to 3.24% of gross rentals. The acquisition of four large shopping malls has
contributed to this increase. As indicated above, certain non-national tenants are being negatively affected by the
difficult economic environment. Our property managers, JHI and Broll, report similar trends across the various portfolios
they manage.
Impairment allowance - tenant receivables
The allowance for the impairment of tenant receivables has increased from R27.4 million at 31 March 2015 to R28.0 million
at 31 March 2016, which is considered adequate at this stage. The impairment allowance represents 1.34% of gross
property revenue (March 2015: 1.7%). A summary of the movement in the impairment allowance of trade receivables is set
out below.
R000
Impairment allowance 1 April 2015 27 379
Allowance for receivable impairment for the year 13 507
Receivables written off as uncollectable (12 924)
27 962
Clidet's impairment allowance at acquisition 48
Impairment allowance 31 March 2016 28 010
Bad debt write-off included in profit or loss 13 086
Vukile Asset Management (VAM) business
Vukile acquired 100% of the shares in Capital Land Asset Management (Pty) Ltd in May 2015. This company was renamed
Vukile Asset Management (Pty) Ltd. This company holds the asset and property management contract with Synergy. Since
date of acquisition VAM earned fees from Synergy for an 11-month period amounting to R15.5 million. The asset management
contract with Sanlam was disposed of in the prior year.
Fairvest Property Holdings Limited (Fairvest)
Vukile held 31.2% in Fairvest at year-end, at a cost of R300 million (2015: R250 million). An additional 26.2 million shares
were acquired for R50 million or R1.91 per share in April 2015. Fairvest is fair valued at 31 March 2016 at R328.3 million
or R1.60 per share, representing a capital appreciation of 9.3% since the date of the acquisitions.
The 26.5% increase in income from Fairvest arises from the additional shares acquired in April 2015 and a c.10%
increase in dividends.
Synergy
Vukile sold 934 527 Synergy A shares at R11.77 per share and acquired an additional 1 554 089 Synergy B shares at
R7.25 per share in December 2015. This increased Vukile's overall shareholding in Synergy from 64.61% to 65.02%.
The increase in income from Synergy arises mainly due to a full year's dividend being attributable to Vukile for the
year ended 31 March 2016.
Finance costs
Group finance costs have increased by R49 million, from R261 million to R310 million. The increase in finance costs
is primarily due to additional interest of R62 million arising on additional debt of R1.15 billion raised to part
finance the acquisitions of Moruleng Mall (80%), Soshanguve Batho Plaza, Silverton industrial warehouses,
Tzaneen Maake Plaza (40%), Vereeniging Bedworth Centre and 26.1% of Atlantic Leaf during the year and the impact of
interest rate increases, offset by, inter alia, interest saved on debt repaid.
Investment and other income has increased by R65 million to R90 million (March 2015: R25 million). This is mainly
due to interest receivable of R46 million on the Absa zero deposit which was concluded in May 2015.
The average cost of finance for the year ended 31 March 2016, based on the average of opening and closing
interest-bearing debt, (excluding development debt), equates to 8.5% (March 2015: 8.4%), with 86.4% of interest-bearing
term debt hedged (March 2015: 88.0%).
Group corporate administrative expenditure and asset management
Group corporate administrative expenditure of R81.1 million is R11.1 million higher than the previous year's
expenditure of R70.0 million. The main contributing factor to this variance arises from a R3.8 million recoupment in
respect of shares that were forfeited under the conditional share plan in the prior year, which reduced the prior year
costs from R73.8 million to R70.0 million.
4. BORROWINGS
The group's finance strategy is to minimise funding costs and refinance risk. The business objectives that are
necessary to implement this strategy can be summarised as follows:
Strategy 2016 2015
Diversify funders to at least three providers Five funders Five funders
Diversify funding structures to incorporate, where appropriate: % of total % of total
Bank debt(I) 69% 57%
Secured bonds 19% 26%
Commercial paper/unsecured bonds 12% 17%
100% 100%
Spread expiry terms of all interest-bearing debt to c.25% per annum Achieved Achieved
Hedge or fix more than 75% of interest-bearing debt 86.4% 88.0%
hedged(II) hedged(II)
Maximise interest income and limit negative carry Achieved through increase in access
facilities repayable without break
costs
(I) The increase in the use of bank debt has arisen due to the volatility experienced in the capital markets and
the consequent higher margins becoming less competitive.
(II) Vukile and its subsidiaries - excludes development debt and commercial paper.
The Global Credit Rating Company (Pty) Ltd (GCR) has recently reaffirmed an A corporate rating and an AA+ (RSA)
rating on Vukile's senior secured bonds.
Debt refinancing during the year ended 31 March 2016
Bond refinancing
- R580 million of corporate bonds were refinanced on 6 May 2015 as follows:
- A three-year R380 million bond maturing 8 May 2018 at a 1.42% margin plus swap costs of 7.31%, totalling 8.73%;
- A five-year R200 million bond maturing 8 June 2020 at a 1.65% margin plus swap costs of 7.76%, totalling 9.41%.
- R664 million of commercial paper was refinanced during the year under review.
- R200 million and R56 million of corporate bonds and commercial paper respectively were refinanced on 28 March 2016
as follows:
- R6 million access facility utilised to part repay the R56 million commercial paper;
- R110 million three-year corporate bond maturing March 2019, at a margin of 1.80% plus a swap cost of 7.97%,
totalling 9.77%;
- R140 million by way of six-month commercial paper, at a margin of 0.86% plus three-month Jibar.
Bank refinancing
- R163.3 million bank/SCM debt was restructured in April 2015 as follows:
- R81.67 million extended for a three-year period;
- R81.67 million repaid via cash resources.
- R150 million RMB debt refinanced to 1 April 2018 at three-month Jibar plus 1.8% margin.
- R150 million RMB revolving facility at prime less 1.9%, extended one year to 31 March 2017.
Debt repayment profile
The table below sets out the various tranches of debt payable by the group over the following five years:
Vukile Group
Debt repayment profile March 2017 - March 2021
Current/
Repay- future Financial years ending 31 March
Nature of ment Facility debt Note 2017 2018 2019 2020 2021
debt date (Rm) (Rm) (Rm) (Rm) (Rm) (Rm) (Rm)
DMTN bonds May 2016 1 230 1 230 1 200 340 380 - 310
- 2020
Commercial paper - 472 472 2 302 - - - -
Bank debt April 2015 3 518 2 816 1, 2 1 297 663 735 100 191
- 2018 and 3
Synergy May 996 977 - 500 200 277 -
2017 -
September
2019
Proposed repayment profile - 6 216 5 495 1 799 1 503 1 315 377 501
% 35.8 27.4 20.8 6.9 9.1
% Post 100 1 and 2 27.5 29.5 25.8 7.4 9.8
repayments
in April/
May 2016
Note 1: Bank debt of R200 million and a R200 million corporate bond was repaid in April and May 2016 respectively
from the proceeds from an equity raise in April 2016.
Note 2: On 1 April 2016 R170 million commercial paper was repaid from a new three-year bank facility.
Note 3: Bank debt includes GBP18 million facility.
5. INTEREST RATE HEDGING
At year-end net debt, excluding development loans and commercial paper, amounted to R4.83 billion. Swaps totalling
R4.17 billion have been concluded which equates to 86.4% of debt.
A number of new swaps have been concluded to hedge new debt which was raised to finance acquisitions and to maintain
hedging above 75%, as follows:
SWAPS
Nominal value (Rm) 289.4 100.0 73.7 99.6 50.0
Swap period 2 years 1.5 years 3 years 1 year 1.5 years
Maturity date November 2017 May 2017 October 2018 September 2016 March 2017
Rate (NACQ) (%) 8.95 8.74 7.36 6.66 6.93
SWAPS POST YEAR-END
Nominal value (Rm) 100.0 110.0 143.1 143.1 140.0 30.0
(£6.75m) (£6.75m)
Swap period 4 years 5 years 3 years 5 years 5 years 3 years
Maturity date June 2020 March 2021 February 2019 February 2021 April 2021 April 2019
Rate (NACQ) (%) (1) 7.75 7.97 0.86 1.08 7.97 7.75
Post year-end additional interest rate swaps were concluded to hedge interest on 25% of the £18 million debt. 100%
of the interest on this Sterling debt is now hedged. A new bank debt facility of R170 million was utilised to repay
commercial paper on 1 April 2016 and the abovementioned post year-end swaps were entered into to hedge this new bank
facility.
The current swaps in place represent three years cover.
Swap expiry profile per calendar year (excluding Synergy)
2016 2017 2018 2019 2020 2021 Total
270 792 791 543 783 393 3 572
7.6% 22.2% 22.1% 15.2% 21.9% 11.0% 100%
Synergy has R647 million swaps and fixed debt in place expiring between June 2016 and September 2020.
The company's borrowing capacity is unlimited in terms of its Memorandum of Incorporation (MOI). The group's loan to
value ratio at 31 March 2016 based on the directors' valuations of the property portfolio was 31.9% (March 2015: 29.0%)
compared to the bank's covenants of 50%, the DMTN covenants of 40% in respect of those properties mortgaged as security
under the DMTN programme and 45% in respect of total group debt as a percentage of the value of total group investment
properties. The group has unutilised bank facilities of R560 million at 31 March 2016.
6. GROUP'S VALUE ADDED STATEMENT
A summary of the group's value added statement for the year ended 31 March 2016 is set out below:
2016 % 2015 %
R000 R000
Gross investment property income (excluding straight lining) 2 096 400 1 579 099
Listed property securities income and investment income 118 760 76 269
Asset management net income 2 074 24 694
Property expenses excluding municipal charges (285 302) (258 513)
Other operating expenses excluding employee cost (41 845) (40 394)
Total value created 1 890 087 1 381 155
Value distributed
To employees and office bearers (excluding employee taxes)
Remuneration and benefits including directors fees 42 443 2 30 986 2
To providers of finance
Net finance costs paid 315 754 17 197 229 14
To government
Company taxation, STC, PAYE, SDL 27 369 1 23 520 2
Municipal charges 505 158 27 346 325 25
To providers of capital
Dividends to shareholders 996 312 53 774 216 56
Value reinvested
Depreciation 1 487 0 1 718 0
Deferred taxation 1 564 0 7 161 1
Total value added 1 890 087 100 1 381 155 100
7. DEVELOPMENTS, ACQUISITIONS AND SALES
Upgrades/redevelopments - R654 million
As part of the ongoing strategy to improve the quality of the existing portfolio, the following projects have been
completed, or are in progress.
East Rand Mall
East Rand Mall (in which the company owns a 50% undivided share with Redefine Properties Limited) has been upgraded
and extended at a total cost of R440 million, of which Vukile's share is R220 million. The projected yield on the
total capex is 5.3%.
East Rand Mall, regarded as one of the top regional malls in South Africa, has a GLA of 63 460m², which has
increased to about 70 000m². The main entrances, malls and toilets have been upgraded while some areas have been
reconfigured to allow better utilisation of the available space. New generators have been installed to provide full
back up power to the centre during power outages, while a new PV Cell solar installation on the roof of the parking
deck will decrease the centre's reliance on municipal power.
The extension of 6 540m² incorporates a relocated entrance 4 and a youth oriented mall anchored by a Mr Price
emporium, consisting of their Apparel, Sport and Home outlets and comprising about 3 700m². Cotton-On (1 250m²) will
trade in close proximity to Mr Price.
The major portion of the extensions and upgrades was completed in April 2016 with the reconfiguration of the
premises for a high profile international retailer scheduled for completion in March 2017.
Together with the adjacent East Point (previously East Rand Galleria), which is also being upgraded, shoppers will
experience a dominant super regional shopping centre with a GLA of about 120 000m².
Parow De Tijger: Cure Day Clinic
The existing De Tijger office park consists of four separate blocks with a total GLA of 4 118m². The new Cure Day
Clinic, with a GLA of 1 130m², has been completed at a capex of R24.7 million and a yield of 9.3%. A 10-year lease
with an escalation of 8.0% per year has been concluded with the Pretoria based Cure Day Clinic group.
Durban: The Workshop
The Workshop in Durban has been upgraded at a cost of R75 million.
The following areas have already been completed:
- The upgrade of the various ablution facilities;
- The reconfiguration and upgrade of the food court;
- Replacement of the shop fronts and mall tiles;
- Installation of new ceilings in selected areas;
- Additional lighting in the mall areas and an increase of natural light;
- The installation of a new glass enclosed passenger lift.
New tenants that have already commenced trading in the centre since the upgrade started include Pep Stores, Dunns,
Ackermans, McDonalds, KFC, Pie City, Ice Cream Express, Fish Corner, Edgars Connect, Spec Savers,
Gingers International and FNB. Le Coq Sportif and Bidvest Bank will start trading soon.
Additional work to be completed by June 2016 includes the upgrade to the parking garage and the exterior of the
building.
Pretoria: Sanlynn Office Park
The Sanlynn Office Park consists of two office blocks with a total GLA of 8 624m², of which 6 162m² (71%) is let to
Sanlam. The Sanlam lease expired in December 2015, but has been renewed for another five years. The external facades,
toilet blocks and parking areas have been upgraded. The current upgrade will bring the aesthetics of the buildings
in line with the latest new office developments on Lynnwood Road.
The total capex is R14 million and the project was completed by the end of November 2015.
Pretoria: Arcadia Suncardia
The Arcadia Suncardia building is made up of a retail section on the first two floors, with an office block on top.
The total GLA of the building is 28 937m² with retail comprising 37% of the total area. The upgrade to the external
facades, entrances and the malls in the retail portion was completed in November 2015 at a total capex of R15 million.
The upgrade is aimed at creating an inviting and pleasant environment for both tenants and visitors to Suncardia, thus
improving its marketability.
Bellville: Barons VW building
The Bellville Barons VW building is situated at the Durban Road intersection with the N1 highway.
The first phase will be the installation of the workshop and services area in the current vacant areas and should be
completed by June 2016. The second phase is scheduled for completion by the end of September 2017.
The total capex is R35.4 million. A 10-year lease has been concluded with a blue chip tenant. A yield of 15.1%, net
of costs, is anticipated.
Bellville: Tijger Park 4 and 5 upgrade
The Tijger Park 4 office building has been let to a large blue chip tenant. The lease period is five years with a
gross rental of R103/m² per month escalating at 7% per year.
In terms of the lease agreement the building's facade, entrance foyer and toilet blocks will be upgraded in line
with the recently completed upgrades to the Tijger Park buildings 1, 2 and 3. In addition the roof at first floor
level over the atrium will be replaced by a new roof at the fourth floor level. This will allow additional lease area
of about 225m² to be created on the second and third floor levels.
Sections of the external facades, the entrance foyer, lift lobbies and toilet blocks of Tijger Park 5, which is the
newest of the five office buildings, will be upgraded.
The total capex approved is R20.0 million and the project is scheduled for completion by August 2016.
Dobsonville Centre: Extension and partial upgrade
Dobsonville Centre, with a GLA of 23 177m², is situated in northern Soweto. The centre, which was last upgraded in
2008, trades well and regular requests are received from prospective tenants wanting to lease premises.
An amount of R105.0 million was approved in October 2015 for the demolition of an existing office block on the site,
the extension of the shopping centre and the upgrade of the entrances and the food court area. The proposed extension
to the northern side of the centre will add about 6 000m² GLA while the food court area will be extended by about
1 100m². The projected net yield is 9.5%.
The project approval is conditional upon finalising the proposed Pick n Pay lease plus further leases for at least
60% of the remainder of the additional GLA.
Germiston: Meadowdale Mall
In pursuit of Vukile's desire to cultivate mutually beneficial partnerships, it entered into a sale and development
agreement with the Moolman group for the sale of a 33% interest in the centre, and the refurbishing and expansion of the
centre by 9 400m².
The extended centre measures 45 000m² of which Checkers and House and Home occupies 23 100m². The Checkers and House
and Home lease expires at the end of May 2016 and has been renewed for a further 10-year period with the refurbishment
and expansion project.
The refurbishment project included the upgrading of the external facade, refurbishment of internal ceilings and
bulkheads, retiling of the mall area and repairing the parking area and access roads. Checkers and House and Home also
modernised their outlets. The capital expenditure and allowances paid on the refurbishment of the existing centre amounted to
R65 million for Vukile's 67% share.
The extension of the centre by 9 400m² was completed and opened to the public at the end of October 2015. The new
extension is anchored by Meat World (1 000m²), Apple Tree (1 840m²), Waltons (900m²), Crazy Plastics (1 000m²) and three
fast food outlets, KFC, McDonalds and Nandos. This expansion will attract shoppers from the strip centres located on
Edendale Road which have deteriorated significantly over the past few years. The capital expenditure for this extension
amounted to R70 million for Vukile's 67% share with an expected initial yield of 10% in the first year.
Feedback from tenants and shoppers since the re-launch has been extremely positive.
Current Vukile projects
A summary of major capex projects approved and incurred to 31 March 2016 is set out below:
Capex to date
Property Approved To March April 2015 to Outstanding
2015 March 2016 balance
Louis Leipoldt Medical Centre 22 000 000 - - 22 000 000
Tijger Park 1, 2 and 3 upgrade 52 300 000 50 906 382 975 558 418 060
Durban Workshop 75 000 000 21 841 857 44 336 353 8 821 790
East Rand Mall (50%) 220 000 000 14 079 327 123 969 690 81 950 983
Parow Cure Day Clinic 24 700 000 6 681 951 18 018 049 -
Pretoria Sanlynn 14 000 000 - 13 778 222 221 778
Pretoria Suncardia 15 000 000 - 13 882 518 1 117 482
Tijger Park 4 and 5 upgrade 20 000 000 - 3 788 570 16 211 430
Meadowdale Mall 127 501 000 13 972 357 92 335 419 21 193 224
Randburg Square 83 419 489 - 20 023 764 63 395 725
Bellville Barons Ford 35 400 000 - 4 927 845 30 472 155
Dobsonville Centre 105 000 000 - 1 243 925 103 756 075
Springs Mall (25%) (I) 259 625 000 - 57 476 000 202 149 000
Thavhani Mall (33%) (I) 350 076 000 - - 350 076 000
1 404 021 489 107 481 874 394 755 913 901 783 702
(I) The financing for Springs Mall and Thavhani Mall has already been raised and is invested in a two-year
deposit earning 8.4% per annum, pending completion of these two malls.
The above projects will be financed out of the proceeds from property sales and bank facilities.
Acquisitions - R1.95 billion
Moruleng Mall and Batho Plaza
Vukile acquired two retail centres from New Africa Developments (Pty) Ltd. Moruleng Mall is a 31 421m² regional
shopping centre located in the North West province with a national tenant mix of 88%. Anchor tenants include
Shoprite, Pick n Pay, Edcon and the Truworths Group. A purchase price of R325.8 million was paid to acquire 80%
of Moruleng at an initial yield of 8.68%. The remaining 20% is owned by the Bakgatla-Ba-Kgafela. Moruleng Mall was
transferred in April 2015.
Batho Plaza is a 13 338m² centre located in Soshanguve, Gauteng, with a national tenant mix of 80%. Anchor tenants
include Shoprite and Cashbuild. The property was purchased for R143.8 million at an initial yield of 9.52%.
Batho Plaza was transferred in June 2015.
Nonesi Mall
Nonesi Mall is a 28 147m² regional shopping centre located in Queenstown, Eastern Cape with a national tenant mix of
96%. Anchor tenants include Checkers, Pick n Pay, Woolworths, Edcon and Massmart. The property was purchased for
R376.6 million at an initial yield of 8.25% and transfer was effected in June 2015.
Silverton industrial portfolio
Vukile purchased a distribution warehousing portfolio from the HL Group for R100.8 million at an initial yield of
9.25%. The portfolio comprises six buildings located in close proximity to each other in the Silverton industrial
area. Notable tenants include Massmart, Edcon and Topmed. Transfer took place in July 2015.
Bedworth Centre
Bedworth Centre was transferred to Vukile during October 2015 for R335 million at an initial yield of 8.75%. The
centre was jointly owned by Flanagan & Gerard Property Investment and Development and the Moolman Group. The
Bedworth Centre is a 33 937m² small regional shopping centre located in Bedworth Park in Vereeniging, Gauteng.
The centre is anchored by a Pick n Pay Hyper and Builders Warehouse and has an exceptional lease expiry profile due
to these two anchor tenants, which make up over 75% of the centre, expiring January 2024 and February 2020
respectively. The national tenant component of the centre is just under 90% of the total GLA.
Thavhani Mall
Vukile secured a 33% stake in the 50 000m² Thavhani Mall at Thavhani City in Thohoyandou, Limpopo, for R350.1 million
after concluding a deal with the developers, Thavhani Property Investments (Pty) Ltd.
Thavhani Property Investments is owned by the pre-eminent shopping centre developers, Flanagan & Gerard Property
Investment and Development, together with local partners.
Thavhani Mall is currently under construction and is scheduled for completion in August 2017. It is being developed
on a prime site in Thohoyandou, at the intersection of the R524 road to Louis Trichardt (Makhado) and the new Giyani
Road to Sibasa. Thavhani Mall is now more than 75% let with confirmed anchor tenants including Pick n Pay, Super Spar,
Woolworths and Edgars, while a broad range of other national retailers will be part of the tenant mix.
Springs Mall
Vukile has agreed to acquire a 25% stake in the 44 662m² Springs Mall for R259.6 million which is being developed
and managed by Blue Crane Eco Mall (Pty) Ltd, in which Flanagan & Gerard is a shareholder, together with local partners
Murinda Investments and the D'Arrigo family.
The mall is located just south of the Springs CBD, in a prime location at the R51 off-ramp off the N17. It is
currently 85% let with confirmed anchor tenants including Pick n Pay, Checkers, Woolworths and Edgars. Springs Mall is
currently under construction and is scheduled for completion in March 2017.
The funding for both the above mall developments is in place by way of the R600 million two-year deposit funded from
the R1.1 billion equity raise in May 2015.
Once completed, and based on the cost at which the equity was raised for the developments, both malls will enter the
portfolio on a yield accretive basis.
70% of Maake Plaza
Vukile owns a 30% undivided share in Maake Plaza, a 15 752m² community centre located in Tzaneen district, Limpopo,
which was acquired during July 2014. The acquisition of a further 40% in the centre at a consideration of
R61.6 million and an initial yield of 9.7% was finalised during February 2016.
Atlantic Leaf
Vukile has entered into a strategic relationship with Atlantic Leaf. Atlantic Leaf is a Mauritius-domiciled real
estate investment company, focusing on high quality real estate assets in the United Kingdom. Atlantic Leaf has a
primary listing on the Official List of the Stock Exchange of Mauritius Ltd (the SEM) and a secondary listing on the
Alternative Exchange of the JSE Limited. Atlantic Leaf has a market capitalisation at 31 March 2016 of approximately
R2.9 billion.
Under the terms of the strategic relationship, Vukile subscribed for 16 139 668 new shares in Atlantic Leaf on the
JSE Limited, at a price of R20.08 per share, to a value of R350 million on 1 October 2015 at a forward dividend yield
of 8.8%. This equated to 20.5% of Atlantic Leaf's total shares in issue. Laurence Rapp, CEO of Vukile, was appointed
to the Board of Atlantic Leaf as a non-executive director and is a member of the investment committee.
On 16 February 2016, Vukile further participated in a private placement of Atlantic Leaf shares by subscribing for
an additional 16 071 428 new shares in Atlantic Leaf on the SEM, at a price of £1.12 (R22.70) per share, to a value
of R408.5 million at a forward dividend yield of 7.9%. This transaction increased Vukile's shareholding in
Atlantic Leaf to 26.1%.
Atlantic Leaf holds a portfolio of 54 properties, valued at £264 million, with a total GLA of 335 000m2, a weighted
average unexpired lease term of 12.9 years, and an average asset yield of 7.2%. The properties are predominantly
high-quality industrial and logistics facilities let to blue-chip tenants and located across the United Kingdom.
Property sales concluded during the year - R271 million
In line with the group's winnowing strategy the following non-core properties were disposed of during the year:
Sales
price Yield
R000 % Dates of sale
Johannesburg Rosettenville Village Main 24 395 9.9 6 July 2015
Centurion 259 West Street 30 215 10.4 20 August 2015
Johannesburg Parktown Oakhurst 71 000 9.5 26 August 2015
Kokstad Game Centre 133 000 9.1 1 December 2015
Cape Town Pinelands Pinepark 12 350 Vacant 1 March 2016
270 960
The proceeds from property sales will be utilised to acquire properties that conform to Vukile's investment
requirements and/or to fund expansions and revamps, thereby further enhancing the quality of the portfolio and also
to repay debt.
8. VALUATION OF PORTFOLIO
The accounting policies of the group require that the directors value the entire portfolio every six months at fair
market value. Approximately one half of the portfolio is valued every six months, on a rotational basis, by registered
independent third party valuers. The directors have valued the group's property portfolio at R15.6 billion(l) as at
31 March 2016. This is R2.3 billion or 16.9% higher than the valuation as at 31 March 2015 mainly due to the
acquisition of Queenstown Nonesi Mall, Vereeniging Bedworth Centre, Moruleng Mall (80%), Soshanguve Batho Plaza,
Tzaneen Maake Plaza (40%), Pretoria Silverton Industrial portfolio of six properties and the development of Cape Town
Parow De Tijger Day Clinic. Kokstad Game Centre, Johannesburg Parktown Oakhurst, Centurion 259 West Street,
Johannesburg Rosettenville Village Main Industrial Park and Cape Town Pinelands Pinepark were sold during the year.
The market value of the stable portfolio increased by 8.3%. The calculated recurring forward yield for the portfolio
is 9.2%.
The external valuations by Quadrant Properties (Pty) Ltd and Knight Frank (Pty) Ltd at 31 March 2016 of 52.2% of the
total portfolio are in line with the directors' valuations of the same properties.
(I) The group's property portfolio overview takes into account Moruleng Mall at 80%, whereas in the financial
statements the group property value reflects 100% of Clidet, which owns Moruleng Mall.
9. GROUP PROPERTY PORTFOLIO OVERVIEW
The group property portfolio at 31 March 2016 consisted of 104 properties with a total market value of
R15.6 billion(I) and GLA of 1 427 591m², with an average value of R150 million per property.
The geographical and sectoral distribution of the group's portfolio is indicated in the tables below. The
portfolio is well represented in most of the South African provinces and Namibia. Some 81% of the gross
income is derived from Gauteng, KwaZulu-Natal, Western Cape and Namibia.
(I) The group's property portfolio overview takes into account Moruleng Mall at 80%, whereas in the financial
statements the group property value reflects 100% of Clidet, which owns Moruleng Mall.
Geographic profile Vukile Synergy Total
portfolio portfolio portfolio
% of gross income % % %
Gauteng 54 11 47
KwaZulu-Natal 16 24 17
Western Cape 6 32 11
Namibia 7 - 6
North West 5 5 5
Free State 4 12 5
Limpopo 3 7 3
Mpumalanga 2 9 3
Eastern Cape 3 - 3
Based on market value, 67% of the group portfolio is in the retail sector followed by 15% in the office,
8% in the industrial, 6% in the sovereign, 3% in the hospital and 1% in the motor-related sectors.
The tenant profile for the Vukile and Synergy portfolios are listed in the table below:
Tenant profile Vukile Synergy Total
portfolio portfolio portfolio
% of GLA % % %
Large national and listed tenants and major franchises 47 74 51
Government 12 - 11
National and listed tenants, franchised and medium to large
professional firms 10 6 9
Other 31 20 29
The retail portfolio's exposure to national, listed and franchised tenants is 82% in total.
Vukile's tenant concentration risk is considered to be low as the top 10 tenants account for 39.6% of total GLA.
If the Synergy portfolio is excluded, the top 10 tenants account for 38.6% of total GLA. Local, provincial and
national government is the single largest tenant, occupying 10.4% of total GLA with Shoprite the second largest at
5.8% of total GLA. If the Synergy portfolio is excluded, the exposure to government and Shoprite is 12.1% and
5.8% respectively. The Synergy portfolio's exposure to the top 10 tenants is 45%, with Spar the largest at 19.1% and
Massmart at 6.3%.
Top 10 properties by value
Property Directors'
valuation at
Rentable 31 March
area 2016 % Valuation
Location Sector m² Rm of total R/m²
Boksburg East Rand Mall * Boksburg Retail 34 754 1 220 7.8 35 104
Durban Phoenix Plaza Durban Retail 24 363 747 4.8 30 661
Gugulethu Square Gugulethu Retail 25 322 429 2.8 16 942
Pretoria Navarre Building Pretoria Sovereign 47 202 413 2.6 8 750
Soweto Dobsonville Shopping Centre Soweto Retail 23 177 398 2.6 17 172
Moruleng Mall (80%) Moruleng Retail 25 137 387 2.5 15 396
Cape Town Bellville Louis Leipoldt Cape Town Hospital 22 311 377 2.4 16 897
Pinetown Pine Crest * Pinetown Retail 20 056 375 2.4 18 698
Randburg Square Randburg Retail 40 874 359 2.3 8 783
Queenstown Nonesi Mall Queenstown Retail 28 147 350 2.2 12 435
Total top 10 291 343 5 055 32.4 17 351
*Represents an undivided 50% share in this property.
Directors'
valuation at
Rentable 31 March
area 2016 % Valuation
Sector m² Rm of total R/m²
Retail 221 830 4 265 27.3 19 226
Sovereign 47 202 413 2.7 8 750
Hospital 22 311 377 2.4 16 897
Total 291 343 5 055 32.4 17 351
The 10 largest retail centres (representing 32% of the total retail portfolio value) reflects 89% exposure to
national, listed and franchised tenants.
Top 10 retail centres (based on value)
Directors' National,
valuation at listed and
31 March % of total franchised
2016 retail portfolio tenants
Rm value %
Boksburg East Rand Mall* 1 220 7.8 92.1
Durban Phoenix Plaza 747 4.8 80.4
Gugulethu Square 429 2.8 89.8
Soweto Dobsonville Shopping Centre 398 2.6 83.3
Moruleng Mall (80%) 387 2.5 81.6
Pinetown Pine Crest* 375 2.4 92.8
Randburg Square 359 2.3 84.5
Queenstown Nonesi Mall 350 2.2 96.5
Oshakati Shopping Centre 341 2.2 93.8
Vereeniging Bedworth Centre 339 2.2 94.8
Total top 10 4 945 31.8 89.2
* Represents an undivided 50% share in this property.
10. PROPERTY PORTFOLIO PERFORMANCE
Financial performance for the stable portfolio March March
(excluding recent acquisitions and sales) 2016 2015
Rm Rm % change
Property revenue 1 192 1 129 5.6
Recurring net property expenses 188 175 7.4
Recurring net property income 1 004 954 5.2
Non-recurring property expenses 20 24 (15.7)
Net property income 984 930 5.8
Net cost-to-income ratio (%)* 15.8 15.5 1.8
* Net recurring cost to property revenue ratio (excluding asset management fee). Previously the cost-to-income ratio
was calculated on a gross basis (recoveries included in income), which was changed to a net cost-to-income ratio
(recoveries included in expenses) to align with industry best practice.
New leases and renewals in excess of 306 000m² with a contract value of R1.68 billion were concluded during the year
to date. Some 70% of leases to be renewed during the six months ended 31 March 2016 were renewed or are in the process
of being renewed.
Details of large contracts concluded
Contract Lease
value duration
Tenant Property Sector Rm years
ADT Security Midrand Ulwazi Building Offices 180.2 11
Shoprite Checkers Germiston Meadowdale Mall Retail 128.8 11
Sanlam Pretoria Lynnwood Sanlynn Offices 53.2 5
Protea Hotels Bloemfontein Plaza Retail 38.8 10
Pep Stores Cape Town Bellville Tijger Park Offices 31.5 5
Pick n Pay Durban Workshop Retail 30.2 7
Department of Rural Development Pretoria Arcadia Suncardia Offices 28.5 4
Just Gym Germiston Meadowdale Mall Retail 26.3 12
Cambridge Supermarkets Emalahleni Highland Mews Retail 25.3 10
Spar KwaMashu Shopping Centre Retail 20.3 5
The group lease expiry profile table reflects that 28% of the leases are due for renewal in the 2017 financial year.
Approximately 33% of leases are due to expire in 2020 and beyond (up from 18% in the prior year).
Group lease expiry (% of GLA) Beyond
March March March March March March
Vacant 2017 2018 2019 2020 2021 2021
% % % % % % %
GLA 3.9 28 15 20 11 7 15
Cumulative as at March 2016 3.9 32 47 67 78 85 100
Cumulative as at March 2015 4.6 54 67 82 90 91 100
Vacancies
At 31 March 2016 the portfolio's vacancy (measured as a percentage of GLA) was 3.9% compared to 4.6% at 31 March 2015.
If the current development vacancy of 2 767m² at East Rand Mall and Cape Town Bellville Barons is included in the
31 March 2016 vacancy, the vacancy on area increases from 3.9% to 4.1%.
At 31 March 2016, the portfolio's vacancy (measured as a percentage of gross rental) was 5.0% compared to 5.2% at
31 March 2015. If the development vacancy at East Rand Mall and Cape Town Bellville Barons is included in the
31 March 2016 vacancy, the vacancy as a percentage of rent increases to 5.3% compared to 5.6% at 31 March 2015.
The vacancy per sector (measured as a percentage of GLA) is indicated in the table below.
Office vacancies decreased considerably compared to the previous period, but industrial vacancies are on the
increase.
31 March
2016
31 March Including
2015 develop-
31 March 31 March Development ment
2015 2016 vacancy vacancy
Vacancies (% of GLA) % % % %
Retail 3.4 3.5 0.2 3.7
Offices 10.2 5.0 - 5.0
Industrial 1.9 4.3 - 4.3
Sovereign 5.9 4.2 - 4.2
Hospital 0.0 0.0 - 0.0
Motor related 0.0 0.0 14.1 14.1
Total 4.6 3.9 0.2 4.1
The engagement in various initiatives to reduce portfolio vacancies including broker focus groups, the
publishing of vacancy information directly to brokers and also utilising the Vukile vacancy website, leasing
incentives on selected properties, incentives to property management companies and leasing brokers delivered
significant results during the 2016 financial year in reducing the vacancy to below 4%.
GLA summary GLA m²
Balance at 1 April 2015 1 339 090
GLA adjustments (2 674)
Disposals (38 153)
Acquisitions and extensions 129 328
Balance at 31 March 2016 1 427 591
Vacancy summary Area m² %
Balance at 31 March 2015 61 354 4.6
Less: Properties sold since 31 March 2015 (3 391) (8.9)
Remaining portfolio balance at 31 March 2015 57 963 4.5
Leases expired or terminated early 135 898
Renewal of expired leases (158 475)
Contracts to be renewed (45 869)
Tenants vacated (85 181)
Development vacancy ( 2 767)
New letting of vacant space 153 570
Balance at 31 March 2016 55 139 3.9
Base rentals
(excluding recoveries)
The weighted average monthly base rental rates per sector, between 31 March 2015 and 31 March 2016, are set out
in the table below.
Weighted average base rentals (R/m²)
March March
Excluding recoveries 2016 2015 Escalations
Retail 114.61 108.14 6.0
Offices 94.56 91.63 3.2
Industrial 44.65 41.94 6.5
Sovereign 101.50 93.11 9.0
Hospital 106.55 95.77 11.3
Motor related 121.91 113.93 7.0
Total 96.71 90.90 6.4
The average contractual rental escalation of 7.6% is slightly lower than the previous year (7.8%).
The average escalation on expiry rentals on the total portfolio of 9.1% is very positive against the backdrop
of a difficult trading environment. Positive reversions were achieved across all sectors with retail at 12.3%,
offices at 4.4% and industrial at 5.0%.
The sovereign portfolio had a few smaller lease renewals which did not impact on the overall portfolio trends.
New leases were concluded 6.1% above budget in the retail sector, on budget in the office sector and lower than
budget in the industrial sector.
Expense categories and ratios
Recurring gross property expenses have increased year-on-year mostly due to increases in electricity and water
tariffs and rates and taxes.
The top four expense categories contribute 84% of the total expenses. These are: government services (48%),
rates and taxes (18%), cleaning and security (11%) and property management fees (7%).
The group continuously evaluates methods of containing costs in the portfolio. The stable portfolio's recurring
net costs-to-income ratios have remained stable from 15.7% in March 2015 to 15.8% in March 2016 and hence have been
well contained.
Previously the cost-to-income ratio was calculated on a gross basis (recoveries included in income), which was
changed to a net cost-to-income ratio (recoveries included in expenses) to align with industry best practice.
11. PROSPECTS
We remain concerned about the macro operating environment in South Africa, the spectre of rising interest rates and
the concomitant pressure on the consumer.
The current volatility will impact on the operations of the business as well as the cost of capital, both which are
key value drivers.
The ongoing repositioning of the portfolio will continue during the year ahead as Vukile seeks to further enhance
its portfolio quality through selective yield accretive acquisitions and the disposal of non-core assets. Proceeds from
asset sales will be used to strengthen Vukile's balance sheet as well as provide capacity for offshore expansion.
Notwithstanding this, we anticipate that Vukile will deliver real growth in the year ahead, in line with that
achieved in the current financial year.
The forecast growth in dividend is based on the assumptions that the macro-economic environment does not deteriorate
further and no major corporate failures will occur. Forecast rental income is based on contractual escalations and
market-related renewals. This forecast has not been reviewed or reported on by the company's auditors.
12. FAIR VALUE MEASUREMENT OF NON-FINANCIAL ASSETS (INVESTMENT PROPERTIES)
The fair values of commercial buildings are estimated using an income approach which capitalises the estimated
rental income stream, net of projected operating costs, using a discount rate derived from market yields. The
estimated rental stream takes into account current occupancy levels, estimates of future vacancy levels, the terms
of in-place leases and expectations of rentals from future leases over the remaining economic life of the buildings.
The most significant inputs are the estimated rental value, assumptions regarding vacancy levels, the discount rate
and the reversionary capitalisation rate. The estimated fair value increases if the estimated rental increases,
vacancy levels decline or if discount rates (market yields) and reversionary capitalisation rates decline. The overall
valuations are sensitive to all four assumptions. Management considers the range of reasonable possible alternative
assumptions is greatest for reversionary capitalisation rate rental values and vacancy levels and that there is also an
interrelationship between these inputs. The inputs used in the valuations at 31 March 2016 were:
- The range of the reversionary capitalisation rates applied to the portfolio are between 7.8% and 16.5% (March 2015:
between 8.2% and 17.0%) with the weighted average being 9.7% (March 2015: 9.8%).
- The discount rates applied range between 12.8% and 19.6% (March 2015: between 12.7% and 19.5%) with the weighted
average being 14.2% (March 2015: 14.3%).
Sensitivity analysis
The effect on the fair value of the portfolio of a 0.25% increase in the discount rate would result in a decrease in
the fair value of R420 million (2.7%) (March 2015: R350 million (2.6%)). The average discount rate on the portfolio
would increase from 14.2% to 14.5% (March 2015: 14.6%) and the average exit capitalisation rate would increase from 9.7% to
9.9% (March 2015:10.1%) due to the interlinked nature of the rates. The analysis has been prepared on the assumption
that all other variables remain constant.
In determining future cash flows for valuation purposes, vacancies are forecast for each property based on estimated
demand.
13. OPERATING SEGMENT REPORTING
The revenues and profits generated by the group's operating segments and segment assets are summarised in the table
below.
During the year to 31 March 2016, there has been no change from prior periods in the measurement methods used to
determine operating segments and reported segment profits.
Operating segments analysis
for the year ended 31 March 2016
GROUP
Retail Retail
- Vukile - Synergy Offices Industrial Residential Sovereign
R000 R000 R000 R000 R000 R000
Group income for the year ended 31 March 2016
Property revenue 755 239 250 024 270 331 133 659 1 091 126 690
Straight-line rental income accrual 114 687 39 266 40 799 20 367 140 20 718
869 926 289 290 311 130 154 026 1 231 147 408
Property expenses (net of recoveries) (134 785) (37 598) (49 608) (23 474) (334) (14 609)
Profit from property and other operations 735 141 251 692 261 522 130 552 897 132 799
Group statement of financial position
at 31 March 2016
Assets
Investment properties 7 914 475 2 441 576 1 848 992 1 283 406 22 200
Add: Lease commissions
Goodwill 48 218 3 889
Investment properties held-for-sale 254 439 429 305 937 350
8 217 132 2 441 576 2 278 297 1 287 295 22 200 937 350
Add: Excluded items
Investment property under development
Equity investments
Investment in associate
Furniture, fittings and computer equipment
Available-for-sale financial asset
Derivative financial instruments
Loans receivable
Long-term cash deposit
Deferred taxation assets
Trade and other receivables
Taxation refundable
Cash and cash equivalents
Total assets
Equity and liabilities
Stated capital 3 679 264 1 099 682 1 026 142 578 047 9 999 422 181
Interest-bearing borrowings 2 814 925 841 343 785 082 442 249 7 650 323 002
6 494 189 1 941 025 1 811 224 1 020 296 17 649 745 183
Add: Excluded items
Other components of equity and
retained earnings
Non-controlling interest
Derivative financial instruments
Deferred taxation liabilities
Trade and other payables
Current taxation liabilities
Total equity and liabilities
Operating segments analysis
for the year ended 31 March 2016 (continued)
GROUP Asset
Motor management Total
Hospital related Total business group
R000 R000 R000 R000 R000
Group income for the year ended 31 March 2016
Property revenue 28 857 11 005 1 576 896 2 074 1 578 970
Straight-line rental income accrual 5 267 1 977 243 221 - 243 221
34 124 12 982 1 820 117 2 074 1 822 191
Property expenses (net of recoveries) (365) (307) (261 080) - (261 080)
Profit from property and other operations 33 759 12 675 1 559 037 2 074 1 561 111
Group statement of financial position
at 31 March 2016
Assets
Investment properties 30 791 154 834 13 696 274 13 696 274
Add: Lease commissions 41 618 41 618
13 737 892 13 737 892
Goodwill 52 107 106 265 158 372
Investment properties held-for-sale 376 650 1 997 744 1 997 744
407 441 154 834 15 787 743 106 265 15 894 008
Add: Excluded items
Investment property under development 87 033
Equity investments 328 247
Investment in associate 760 049
Furniture, fittings and computer equipment 2 127
Available-for-sale financial asset 19 842
Derivative financial instruments 42 475
Loans receivable 38 110
Long-term cash deposit 350 000
Deferred taxation assets 2 779
Trade and other receivables 246 873
Taxation refundable 1 217
Cash and cash equivalents 582 459
Total assets 18 355 219
Equity and liabilities
Stated capital 183 511 69 737 7 068 563 7 068 563
Interest-bearing borrowings 140 400 53 355 5 408 006 5 408 006
323 911 123 092 12 476 569 12 476 569
Add: Excluded items
Other components of equity and
retained earnings 4 864 011
Non-controlling interest 556 681
Derivative financial instruments 5 269
Deferred taxation liabilities 10 743
Trade and other payables 439 937
Current taxation liabilities 2 009
Total equity and liabilities 18 355 219
Operating segments analysis
for the year ended 31 March 2015
Retail Retail
- Vukile - Synergy Offices Industrial Sovereign
GROUP R000 R000 R000 R000 R000
Group income for the year ended 31 March 2015
Property revenue 823 663 53 866 360 774 147 865 153 290
Straight-line rental income accrual 49 445 3 152 20 305 10 547 10 453
873 108 57 018 381 079 158 412 163 743
Property expenses (318 753) (21 683) (153 426) (40 164) (46 552)
Profit from property and other operations 554 355 35 335 227 653 118 248 117 191
Group statement of financial position at 31 March 2015
Assets
Investment properties 5 982 709 2 421 987 2 016 473 1 152 249 993 913
Add: Lease commissions
Goodwill 53 169 3 889
Investment properties held for sale 133 000 119 770 27 249
6 168 878 2 421 987 2 136 243 1 183 387 993 913
Add: Excluded items
Investment property under development
Equity investments
Furniture, fittings and computer equipment
Available-for-sale financial asset
Loans receivables
Deferred taxation assets
Trade and other receivables
Taxation refundable
Cash and cash equivalents
Total assets
Equity and liabilities
Stated capital 2 599 365 1 029 421 907 970 501 323 422 444
Interest-bearing borrowings 1 772 403 701 920 619 111 341 833 288 048
4 371 768 1 731 341 1 527 081 843 156 710 492
Add: Excluded items
Other components of equity and retained earnings
Non-controlling interest
Deferred taxation liabilities
Derivative financial instruments
Trade and other payables
Current taxation liabilities
Total equity and liabilities
Operating segments analysis
for the year ended 31 March 2015 (continued) Asset
Motor management Total
Hospital related Total business group
GROUP R000 R000 R000 R000 R000
Group income for the year ended 31 March 2015
Property revenue 28 507 11 134 1 579 099 24 694 1 603 793
Straight-line rental income accrual 2 454 959 97 315 97 315
30 961 12 093 1 676 414 24 694 1 701 108
Property expenses (3 450) (1 344) (585 372) (34 388) (619 760)
Profit from property and other operations 27 511 10 749 1 091 042 (9 694) 1 081 348
Group statement of financial position at 31 March 2015
Assets
Investment properties 363 277 135 080 13 065 688 13 065 688
Add: Lease commissions 39 640 39 640
13 105 328 13 105 328
Goodwill 57 058 57 058
Investment properties held for sale 280 019 280 019
363 277 135 080 13 442 405 13 442 405
Add: Excluded items
Investment property under development 15 849
Equity investments 384 800
Furniture, fittings and computer equipment 3 248
Available-for-sale financial asset 21 576
Loans receivables 38 110
Deferred taxation assets 3 888
Trade and other receivables 147 429
Taxation refundable 133
Cash and cash equivalents 473 889
Total assets 14 531 327
Equity and liabilities
Stated capital 154 404 57 413 5 672 340 5 672 340
Interest-bearing borrowings 105 282 39 148 3 867 745 3 867 745
259 686 96 561 9 540 085 9 540 085
Add: Excluded items
Other components of equity and retained earnings 4 158 306
Non-controlling interest 516 317
Deferred taxation liabilities 1 173
Derivative financial instruments 12 919
Trade and other payables 300 880
Current taxation liabilities 1 647
Total equity and liabilities 14 531 327
14. DECLARATION OF A CASH DIVIDEND WITH THE ELECTION TO REINVEST THE CASH dividend IN RETURN FOR VUKILE SHARES
Notice is hereby given of a gross dividend amounting to 83.12600 cents per share, out of distributable income, for
the six-month period to 31 March 2016.
Shareholders will be entitled to elect (in respect of all or part of their holding) to reinvest the cash dividend of
83.12600 cents per share, in return for shares (the share reinvestment alternative), failing which they will receive
the cash dividend in respect of (all or part of) their holdings.
A circular providing further information in respect of the cash dividend and the share reinvestment alternative will
be posted to shareholders on 26 May 2016.
Shareholders who have dematerialised their shares are required to notify their duly appointed Central Securities
Depository Participant (CSDP) or broker of their election in the manner and time stipulated in the custody agreement
governing the relationship between the shareholder and their CSDP or broker.
Tax implications
Vukile was granted REIT status by the JSE Limited with effect from 1 April 2013 in line with the REIT structure as
provided for in the Income Tax Act, 58 of 1962, as amended (the Income Tax Act) and section 13 of the JSE Listings
Requirements.
The REIT structure is a tax regime that allows a REIT to deduct qualifying dividends paid to investors, in
determining its taxable income.
The cash dividend of 83.12600 cents per share meets the requirements of a €œqualifying distribution€? for the purposes
of section 25BB of the Income Tax Act (a qualifying distribution) with the result that:
- Qualifying distributions received by resident Vukile shareholders must be included in the gross income of such
shareholders (as a non-exempt dividend in terms of section 10(1)(k)(i)(aa) of the Income Tax Act), with the effect
that the qualifying distribution is taxable as income in the hands of the Vukile shareholder. This qualifying
distribution is, however, exempt from dividends withholding tax, provided that the South African resident shareholders
provided the following forms to their CSDP or broker, as the case may be, in respect of uncertificated shares, or the
Company, in respect of certificated shares:
- A declaration that the dividend is exempt from dividends tax.
- A written undertaking to inform the CSDP, broker or the company, as the case may be, should the circumstances
affecting the exemption change or the beneficial owner cease to be the beneficial owner,
both in the form prescribed by the Commissioner for the South African Revenue Service. Shareholders are advised to
contact their CSDP, broker or the company, as the case may be, to arrange for the abovementioned documents to be
submitted prior to payment of the dividend, if such documents have not already been submitted.
- Qualifying distributions received by non-resident Vukile shareholders will not be taxable as income and instead
will be treated as ordinary dividends but which are exempt in terms of the usual dividend exemptions per section
10(1)(k) of the Income Tax Act. It should be noted that until 31 December 2013 qualifying distributions received by
non-residents were not subject to dividends withholding tax. From 1 January 2014, any qualifying distributions are
subject to dividends withholding tax at 15%, unless the rate is reduced in terms of any applicable agreement for the
avoidance of double taxation (DTA) between South Africa and the country of residence of the shareholder. Assuming
dividends withholding tax will be withheld at a rate of 15%, the net dividend amount due to non-resident shareholders
is 70.65710 cents per share. A reduced dividend withholding rate in terms of the applicable DTA, may only be relied upon
if the non-resident holder has provided the following forms to their CSDP or broker, as the case may be, in respect of
uncertificated shares, or the company, in respect of certificated shares:
- A declaration that the dividend is subject to a reduced rate as a result of the application of a DTA.
- A written undertaking to inform their CSDP, broker or the company, as the case may be, should the circumstances
affecting the reduced rate change or the beneficial owner cease to be the beneficial owner,
both in the form prescribed by the Commissioner for the South African Revenue Service. Non-resident holders are
advised to contact their CSDP, broker or the company, as the case may be, to arrange for the abovementioned documents
to be submitted prior to payment of the distribution if such documents have not already been submitted, if applicable.
Shareholders who are South African residents are advised that in electing to participate in the share reinvestment
alternative, pre-taxation funds are utilised for the reinvestment purposes and that taxation will be due on the total
cash distribution amount of 83.12600 cents per share.
Shareholders are further advised that:
- The issued capital of Vukile is 671 335 926 shares of no par value before any election to reinvest the cash
dividend.
- Vukile's tax reference number is 9331/617/14/3.
This cash dividend or share reinvestment alternative may have tax implications for resident as well as non-resident
shareholders. Shareholders are therefore encouraged to consult their tax and/or professional advisors should they be in
any doubt as to the appropriate action to take.
Summary of the salient dates relating to the cash dividend and share reinvestment alternative are as follows:
2016
Circular and form of election posted to shareholders Thursday, 26 May
Finalisation information including the ratio and
price per share published on SENS Thursday, 2 June
Last day to trade in order to participate in the election
to receive the share reinvestment alternative or to receive
a cash dividend (LDT) Thursday, 9 June
Share trade ex dividend Friday, 10 June
Listing of maximum possible number of shares under the
share reinvestment alternative Monday, 13 June
Last day to elect to receive the share reinvestment alternative
or to receive a cash dividend (no late forms of election will
be accepted) at 12:00 (SA time) Friday, 17 June
Record date for the election to receive the share reinvestment
alternative or to receive a cash dividend (record date) Friday, 17 June
Results of cash dividend and share reinvestment alternative
published on SENS Monday, 20 June
Cash distribution cheques posted to certificated shareholders
on or about Monday, 20 June
Accounts credited by CSDP or broker to dematerialised holders
with the cash dividend payment Monday, 20 June
Certificates posted to certificated shareholders on or about Wednesday, 22 June
Accounts updated with new shares (if applicable) by CSDP or broker
to dematerialised shareholders Wednesday, 22 June
Adjustment to shares listed on or about Thursday, 23 June
Notes:
1. Shareholders electing the share reinvestment alternative are alerted to the fact that the new shares will be
listed on LDT + 3 and that these new shares can only be traded on LDT + 3, due to the fact that settlement of the
shares will be three days after the record date, which differs from the conventional one day after record date
settlement process.
2. Shares may not be dematerialised or rematerialised between Friday, 10 June 2016 and Friday, 17 June 2016, both
days inclusive.
3. The above dates and times are subject to change. Any changes will be released on SENS.
15. UPDATE ON STRATEGIC INITIATIVES
15.1 Post year-end, Vukile has continued to engage with Synergy and Arrowhead Properties Limited (Arrowhead), in a
due diligence process to further the terms of a transaction in terms of which:
- Synergy's asset management will be internalised
- Vukile will acquire all or the bulk of Synergy's retail assets in return for the sale by Vukile to Synergy
of the majority of Vukile's office and industrial assets
- Synergy will acquire 100% of the shares in Cumulative Properties Limited, a subsidiary of Arrowhead that will
house its portfolio of higher yielding retail, office and industrial properties, in return for the issue of
Synergy B shares to Arrowhead
- If concluded, the transaction will result in Vukile's retail exposure to direct property increasing to c.92%
while group gearing reduces to c.24%.
15.2 Following the completion of a satisfactory due diligence exercise Vukile has received a signed offer for the
sale of the Sovereign tenant portfolio. The offer is still subject to certain conditions precedent. The proceeds
from the sale will be earmarked for future offshore expansion.
16. POST YEAR-END EVENT
R400 million equity capital raise
In April 2016 Vukile concluded a successful equity capital raise of R400 million. Shares were issued to the market at
a price of R16.90 per share. Proceeds from the capital raise were used to repay debt in April 2016 which has had the
effect of reducing the group’s loan to value ratio to 29.5% from 31.9% at year end.
17. BASIS OF PREPARATION
The audited condensed consolidated financial statements for the year ended 31 March 2016, and comparative
information, have been prepared in accordance with and containing the information required by International
Financial Reporting Standards (IFRS), International Accounting Standard IAS 34 - Interim Financial Reporting, the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Announcements as issued
by the Financial Reporting Standards Council, the JSE Listings Requirements and relevant sections of the South African
Companies Act. Except for the new amendments adopted as set out below, all accounting policies applied by the group in the
preparation of these consolidated financial statements are consistent with those applied by the group in its consolidated
financial statements as at and for the year ended 31 March 2015. The group has adopted the following amendments to standards
which were effective for the first time for the financial period commencing 1 April 2015:
- Amendments to IFRS 2 - Share-based Payments;
- Amendments to IFRS 3 - Business Combinations;
- Amendments to IFRS 8 - Operating Segments;
- Amendments to IFRS 13 - Fair Value Measurement;
- Amendments to IAS 16 - Property, Plant, and Equipment;
- Amendments to IAS 19 - Employee Benefits;
- Amendments to IAS 24 - Related Party Disclosure
- Amendments to IAS 38 - Intangible Assets; and
- Amendments to IAS 40 - Investment Properties.
There was no material impact identified on the financial statements based on management's assessment of these
amendments.
These statements, which comprise the statement of financial position at 31 March 2016 and the statement of
comprehensive income, statement of changes in equity and statement of cash flows for the 12 months then ended is extracted from
audited information, but is itself not audited. The annual financial statements were audited by Grant Thornton, who
expressed an unmodified opinion thereon. The auditor's report does not necessarily cover all of the information included in
this announcement. Shareholders are therefore advised that, in order to obtain a full understanding of the nature of the
auditor's work, they should obtain a copy of the audit report together with the accompanying financial information from
the registered office of the company situated at Ground Floor, One-On-Ninth, Corner Glenhove Road and Ninth Street,
Melrose Estate.
The directors take full responsibility for the preparation of this report and that the financial information has
been correctly extracted from the underlying financial statements.
This report was compiled under the supervision of Michael John Potts CA(SA), the financial director of the company.
The directors are not aware of any matters or circumstances arising subsequent to 31 March 2016 that require any
additional disclosure or adjustment to the financial statements and which are not disclosed in this announcement.
On behalf of the board
AD Botha LG Rapp
Chairman Chief executive officer
Melrose Estate
24 May 2016
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 March 2016
GROUP 2016 2015
R000 R000
ASSETS
Non-current assets 15 525 681 13 629 857
Investment properties 13 302 386 12 824 122
Investment properties 13 737 892 13 105 328
Straight-line rental income adjustment (435 506) (281 206)
Other non-current assets 2 223 295 805 735
Straight-line rental income asset 435 506 281 206
Investment in associate 760 049 -
Equity investments 328 247 384 800
Investment property under development 87 033 15 849
Furniture, fittings, computer equipment and other 2 127 3 248
Available-for-sale financial asset 19 842 21 576
Goodwill 158 372 57 058
Derivative financial instruments 41 230 -
Deferred taxation assets 2 779 3 888
Long-term cash deposit 350 000 -
Long-term loans granted 38 110 38 110
Current assets 831 794 621 451
Trade and other receivables 246 873 147 429
Short-term derivative financial instruments 1 245 -
Current taxation assets 1 217 133
Cash and cash equivalents 582 459 473 889
Investment properties held for sale 1 997 744 280 019
Total assets 18 355 219 14 531 327
EQUITY AND RESERVES
Equity attributable to owners of the parent 11 932 574 9 830 646
Non-controlling interest 556 681 516 317
Non-current liabilities 4 114 331 2 830 180
Other interest-bearing borrowings 4 098 319 2 816 088
Derivative financial instruments 5 269 12 919
Deferred taxation liabilities 10 743 1 173
Current liabilities 1 751 633 1 354 184
Trade and other payables 439 937 300 880
Borrowings 1 309 687 1 051 657
Current taxation liabilities 2 009 1 647
Total equity and liabilities 18 355 219 14 531 327
Net asset value (cents per share) 1 842 1 716
CONDENSED CONSOLIDATED STATEMENT OF PROFIT AND LOSS
for the year ended 31 March 2016
GROUP 2016 2015
R000 R000
Property revenue 2 096 400 1 579 099
Straight-line rental income accrual 243 221 97 315
Gross property revenue 2 339 621 1 676 414
Property expenses (780 584) (585 372)
Net profit from property operations 1 559 037 1 091 042
Net income from asset management business 2 074 (9 694)
Corporate administrative expenses (84 288) (36 992)
Investment and other income 99 337 76 269
Operating profit before finance costs 1 576 160 1 120 625
Finance costs (394 301) (273 498)
Profit before capital items 1 181 859 847 127
Loss on sale of investment properties (31 883) (23 562)
Profit on sale of furniture, fittings and equipment - 6
Fair value (loss)/gain on listed property securities (98 425) 172 180
Fair value movement of derivative financial instruments (1 342) 1 527
Amortisation of debenture premium - 19 227
Foreign exchange profit 26 825 -
Profit on sale of listed property securities 547 -
Other capital items - (168)
Fair value of fixed loan at date of acquiring control remeasured - (290)
Gain on bargain purchase 1 053 178 997
Goodwill written-off on sale of properties by a subsidiary (4 951) -
Costs of acquisition of business combination (1 230) (2 778)
Loss on sale of intangible asset - (61 595)
Profit before fair value adjustments 1 072 453 1 130 671
Fair value adjustments 560 049 379 017
Gross change in fair value of investment properties 803 270 476 332
Straight-line rental income adjustment (243 221) (97 315)
Profit before equity accounted investment 1 632 502 1 509 688
Profit share of associate 19 423 -
Profit before taxation 1 651 925 1 509 688
Taxation (9 076) (26)
Profit for the year 1 642 849 1 509 662
Profit attributable to:
Owners of the parent 1 586 079 1 499 995
Non-controlling interests 56 770 9 667
Other comprehensive income
Items that will be reclassified subsequently to profit or loss
Currency loss on translation of investment in associate (7 377) -
Cash flow hedges 40 673 (30 667)
Available for sale financial assets - current year loss (21 498) (12 169)
Other comprehensive income/(loss) for the year 11 798 (42 836)
Total comprehensive income for the year 1 654 647 1 466 826
Total comprehensive income attributable to:
Owners of the parent 1 597 664 1 457 159
Non-controlling interest 56 983 9 667
Basic and diluted earnings per share (cents) 249.55 278.01
Weighted average number of shares in issue 635 569 998 539 547 572
Number of shares in issue 647 667 287 572 747 744
RECONCILIATION OF EARNINGS TO HEADLINE EARNINGS AND TO PROFIT AVAILABLE FOR DISTRIBUTION
for the year ended 31 March 2016
2016 2015
Group Cents per Group Cents per
R000 share R000 share
Attributable profit to owners of parent 1 586 079 249.55 1 499 995 278.01
Earnings per share 1 586 079 249.55 1 499 995 278.01
Change in fair value of investment properties
(net of allocation to non-controlling interest) (546 188) (85.94) (379 017) (70.25)
Gain on bargain purchase price (1 053) (0.17) (178 997) (33.18)
Write-off in goodwill on sale of properties sold by a subsidiary 4 951 0.78 - -
Loss on sale of investment properties 31 883 5.02 23 562 4.37
Profit on disposal of furniture, fittings and equipment and other - - (6) -
Profit on sale of listed securities (547) (0.08) - -
Fair value earnings of associate-adjusted headline earnings (7 353) (1.16) - -
Loss on sale of intangible asset - - 61 595 11.42
Amortisation of debenture premium - - (19 227) (3.56)
Headline earnings of shares 1 067 772 168.00 1 007 905 186.81
Straight-line rental accrual net of deferred taxation (243 221) (38.27) (97 315) (18.04)
Revaluation of surplus on listed securities 98 425 15.49 (149 602) (27.73)
Cost of acquisition of business combination 1 230 0.19 2 778 0.51
Fair value movement of derivative financial instruments 1 342 0.21 (1 527) (0.28)
Gain on deemed disposal of Synergy previously accounted for
under IAS 39 - - (22 578) (4.19)
Pre-acquisition dividends - - 1 293 0.24
Foreign exchange profit (26 825) (4.22) - -
Project management fees received from sale of the
Sanlam Asset Management business 8 000 1.26 - -
Shares issued cum dividend 63 024 9.92 33 262 6.16
Fair value earnings of associate - headline earnings adjustment 7 353 1.16 - -
Dividends receivable from listed securities 19 212 3.02 - -
Profit available for distribution 996 312 156.76 774 216 143.48
Weighted average number of shares in issue 635 569 998 539 547 572
Headline and diluted headline earnings per share 168.00 186.81
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
for the year ended 31 March 2016
2016 2015
Group Group
R000 R000
Cash flow from operating activities 1 282 448 929 939
Cash flow from investing activities (2 124 333) 17 302
Cash flow from financing activities 1 300 455 (771 527)
Net increase in cash and cash equivalents 458 570 175 714
Cash and cash equivalents at the beginning of the year 473 889 298 175
Cash and cash equivalents at the end of the year 932 459 473 889
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2016
R000 Share capital Non- Non-
and share distributable Retained Shareholders' controlling
premium reserves earnings interest interest Total
GROUP
Balance at 31 March 2014 81 863 2 979 338 47 488 3 108 689 - 3 108 689
Issue of shares 21 680 - - 21 680 - 21 680
Dividend - - (329 260) (329 260) - (329 260)
103 543 2 979 338 (281 772) 2 801 109 - 2 801 109
Profit for the year - - 1 499 995 1 499 995 9 667 1 509 662
Change in fair value of investment properties - 468 235 (476 332) (8 097) 8 097 -
Share-based remuneration - 11 678 - 11 678 - 11 678
Transfer from non-distributable reserve - 94 791 (94 791) - - -
Conversion of debentures to ordinary share capital 5 568 797 - - 5 568 797 - 5 568 797
NCI recognised in respect of Synergy Limited - - - - 498 553 498 553
Revaluation of investments - 172 180 (172 180) - - -
Other comprehensive loss - (42 836) - (42 836) - (42 836)
Balance at 31 March 2015 5 672 340 3 683 386 474 920 9 830 646 516 317 10 346 963
Issue of shares 1 396 223 - - 1 396 223 - 1 396 223
Dividend - - (901 643) (901 643) (35 851) (937 494)
7 068 563 3 683 386 (426 723) 10 325 226 480 466 10 805 692
Profit for the year - - 1 586 079 1 586 079 56 770 1 642 849
Change in fair value of investment properties - 803 270 (803 270) - - -
Change in fair value of investments attributable
to non-controlling interest - (13 860) 13 860 - - -
Share-based remuneration - 15 770 - 15 770 - 15 770
Deferred taxation on change in fair value of derivatives - (10 417) - (10 417) - (10 417)
Transfer from non-distributable reserve - (8 409) 8 409 - - -
Cost of conversion of debentures to stated capital
by subsidiary (710) - (710) (389) (1 099)
Gain from change in shareholding in subsidiary - 5 041 - 5 041 (5 863) (822)
Non-controlling interest arising on business combination - - - - 25 484 25 484
Revaluation of investments - (98 425) 98 425 - - -
Other comprehensive income - 11 585 - 11 585 213 11 798
Balance at 31 March 2016 7 068 563 4 387 231 476 780 11 932 574 556 681 12 489 255
1. MEASUREMENTS OF FAIR VALUE
1.1 Financial instruments
The financial assets and liabilities measured at fair value in the statement of financial position are grouped into
the fair value hierarchy as follows:
2016 2015
Level 1 Level 2 Total Level 1 Level 2 Total
GROUP R000 R000 R000 R000 R000 R000
ASSETS
Investments 328 247 - 328 247 384 800 - 384 800
Available-for-sale financial assets 57 324 - 57 324 51 539 - 51 539
Derivative financial instruments 42 475 42 475 - - -
Total 385 571 42 475 428 046 436 339 - 436 339
LIABILITIES
Available-for-sale financial liabilities - (37 482) (37 482) - (29 963) (29 963)
Derivative financial instruments - (5 269) (5 269) - (12 919) (12 919)
Total - (42 751) (42 751) - (42 882) (42 882)
Net fair value 385 571 (276) 385 295 436 339 (42 882) 393 457
Measurement of fair value
The methods and valuation techniques used for the purpose of measuring fair value are unchanged compared to the
previous reporting period.
Investments
This comprises shares held in listed property companies at fair value which is determined by reference to quoted
closing prices at the reporting date.
Available-for-sale financial assets
This comprises equity-settled share-based long-term incentive reimbursement rights stated at fair value. Fair
value has been determined by reference to Vukile's quoted closing price at the reporting date after deduction of
executive and management rights.
Derivative financial instruments
The fair values of these swap contracts are determined by Absa Capital, Rand Merchant Bank, Standard Bank and
Investec Bank Limited using a valuation technique that maximises the use of observable market inputs. Derivatives
entered into by the group are included in Level 2 and consist of interest rate swap contracts.
1.2 NON-FINANCIAL ASSETS
The following table reflects the levels within the hierarchy of non-financial assets measured at fair value at
31 March 2016:
2016 2015
Level 3 Level 3
R000 R000
Assets
Investment properties 13 737 892 13 105 328
Investment properties held for sale 1 997 744 280 019
Fair value measurement of non-financial assets (investment properties)
The fair value of commercial buildings are estimated using an income approach which capitalises the
estimated rental income stream, net of projected operating costs, using a discount rate derived from market
yields. The estimated rental stream takes into account current occupancy levels, estimates of future vacancy
levels, the terms of in-place leases and expectations of rentals from future leases over the remaining economic
life of the buildings.
The most significant inputs are the estimated rental value, assumptions regarding vacancy levels, the discount
rate and the reversionary capitalisation rate. The estimated fair value increases if the estimated rental increases,
vacancy levels decline or if discount rates (market yields) and reversionary capitalisation rates decline. The
overall valuations are sensitive to all four assumptions. Management considers the range of reasonable possible
alternative assumptions is greatest for reversionary capitalisation rate rental values and vacancy levels and that
there is also an interrelationship between these inputs. The inputs used in the valuations at 31 March 2016 were:
- The range of the reversionary capitalisation rates applied to the portfolio are between 7.8% and 16.5% (March 2015:
Between 8.2% and 17.0%) with the weighted average being 9.7%. (March 2015: 9.8%).
- The discount rates applied range between 12.8% and 19.6% (March 2015: between 12.7% and 19.5%) with the weighted
average being 14.2% (March 2015: 14.3%).
Sensitivity analysis
The effect on the fair value of the portfolio of a 0.25% increase in the discount rate would result in a decrease
in the fair value of R420 million (2.7%) (March 2015: R350 million (2.6%). The average discount rate on the portfolio
would increase from 14.2% to 14.5% (March 2015: 14.6%) and the average exit capitalisation rate would increase from
9.7% to 9.9% (March 2015:10.1%) due to the interlinked nature of the rates. The analysis has been prepared on the
assumption that all other variables remain constant.
In determining future cash flows for valuation purposes, vacancies are forecast for each property based on
estimated demand.
JSE Sponsor: Java Capital
NSX Sponsor: IJG Group, Windhoek, Namibia
Executive directors: LG Rapp (chief executive), MJ Potts (financial director), HC Lopion (executive director:
asset management), GS Moseneke
Non-executive directors: AD Botha (Chairman), PS Moyanga, SF Booysen, RD Mokate, H Ntene, NG Payne, HM Serebro
There have been no changes to the board of directors since the release of the previous results announcement, other
than the resignation of SEN Sebotsa in November 2015.
Registered office: Ground Floor One-on-Ninth, Corner Glenhove Road and Ninth Street, Melrose Estate, 2196.
Company secretary: J Neethling
Transfer secretaries: Link Market Services South Africa (Pty) Ltd, Braamfontein, Johannesburg
Investor and media relations: Marketing Concepts, 10th Floor, Fredman Towers, 13 Fredman Drive, Sandton, Johannesburg,
South Africa ,Tel: +27 11 783 0700, Fax: +27 11 783 3702
www.vukile.co.za
Date: 26/05/2016 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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