Wrap Text
Unaudited condensed consolidated interim results for the six months ended 30 September 2017
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)
Unaudited condensed consolidated interim results for the six months ended 30 September 2017
Highlights
- 7.4% increase in dividends in line with guidance to 72.65 cents per share
- Further investment of R407 million in Atlantic Leaf to facilitate portfolio acquisition
- Concluded landmark Spanish acquisition of 11 retail parks for €193 million
- Gearing remains conservative at 29%
- 24% of assets now offshore
- 6.1% increase in like-for-like net property revenue
Commentary
1. NATURE OF OPERATIONS
Vukile is a property holding and investment company with direct and indirect ownership of immovable
property. The group holds a portfolio of predominantly direct retail property assets in southern
Africa as well as strategic shareholdings in listed Real Estate Investment Trusts (REITs). The company
is listed on the Johannesburg Stock Exchange (JSE) and the Namibian Stock Exchange (NSX) under the
Retail REITs sector. The group also has property investments in the United Kingdom and Spain.
2. SIGNIFICANT EVENTS AND TRANSACTIONS
During this reporting period, the following significant transactions were effected:
- On 3 July 2017, Vukile announced a groundbreaking acquisition by its subsidiary, Castellana Properties
SOCIMI SA (Castellana), of 11 retail parks for €193 million (R3 billion). Castellana procured debt funding
of €94.8 million by way of loans from Spanish lenders secured over the retail parks (with no recourse to
Vukile), at an all-in cost of debt of 1.8%. The balance of the purchase consideration and a portion of the
transaction costs amounting to €103 million were funded by Vukile from internal cash resources and debt
facilities. Following this transaction, Vukile now owns 98.3% of the issued Castellana shares.
- Further investment in Atlantic Leaf Properties Limited (ALP or Atlantic Leaf):
Vukile increased its shareholding in ALP to c.35% through acquiring a further 23.2 million shares at a cost
of R407.5 million during an oversubscribed accelerated bookbuild undertaken by ALP in September 2017. ALP
raised £47 million to fund, inter alia, the acquisition of 11 retail warehouse and industrial properties in
the UK, tenanted by DFS Trading Limited.
- Thavhani Mall, a 50 637m² regional mall in Thohoyandou, Limpopo, opened in August 2017 with huge support from
the community. Vukile paid R367 million for a 33.3% interest in the mall which is already reviewing expansion
opportunities driven by tenant demand.
- On 18 July 2017, Vukile announced an oversubscribed equity raise of R650 million at R18.80 per share.
3. SUMMARY OF FINANCIAL PERFORMANCE
The directors of Vukile are pleased to report that the dividend for the six months ended 30 September 2017
has increased by 7.4% to 72.6535 cents per share (prior period: 67.6475 cents per share).
The group’s net profit available for distribution amounted to R578.5 million for the six months to 30 September 2017
(September 2016: R526.1 million), which represents an increase of 10% over the comparable period.
Summary of financial performance:
September September March
2017 2016 2017
Net asset value per share (cents) 1 917 1 851 1 868
Dividend per share (cents) 72.65 67.65 156.75
Loan to value ratio (%)(I) 30.5 26.6 25.1
Loan to value ratio net of available cash (%) 28.8 18.2 19.4
Gearing ratio (%)(II) 28.9 24.3 23.0
(I) Interest-bearing debt (includes R77 million commercial paper issued to a Namibian subsidiary which is
eliminated on consolidation) divided by directors’ valuation of the group’s property portfolio at
30 September 2017 plus equity investments.
(II) The gearing ratio is calculated by dividing total interest-bearing borrowings (which includes
R77 million commercial paper issued to a Namibian subsidiary which is eliminated on consolidation)
by total assets.
A reconciliation of distributable earnings is set out under the segmental report below.
(a) Net profit from property operations
The group’s net profit from property operations, exclusive of straight-line rental accruals, has decreased
by R102.3 million (14.5%) over the comparable period, from R705.2 million to R602.9 million primarily as a
result of the sale of the Sovereign portfolio and the redeployment of the proceeds into Spain. However, the
stable portfolio reflected a pleasing like-for-like growth of 6.1% for the six months ended 30 September 2017.
The contributions to this decrease are made up as follows:
Rm
Stable portfolio 23.3
Properties acquired 196.4
Properties disposed of (314.4)
Net interest reclassified (7.6)
(102.3)
Further details of the property portfolio performance are set out in paragraph 12.
Impairment allowance for tenant receivables
The allowance for the impairment of tenant receivables has increased from R32 million at 31 March 2017
to R37.7 million at 30 September 2017, which is considered adequate at this stage. The impairment allowance
represents 1.86% of gross rental income for the 12 months ended 30 September 2017 (March 2017: 1.8%). A summary
of the movement in the impairment allowance for trade receivables is set out below:
R000
Impairment allowance 1 April 2017 32 389
Allowance for receivables impairment for the six-month period 13 538
Receivables written off as uncollectible (8 253)
Impairment allowance 30 September 2017 37 674
Bad debt write-off per the statement of comprehensive income 8 094
(b) Corporate administrative and asset management expenditure
Group corporate administrative expenditure of R56.8 million is R5.1 million higher than the previous
year’s expenditure of R51.7 million.
The variance is partly due to an increase in remuneration costs of R5.7 million over the prior year,
which includes the appointment of additional employees in South Africa, and by Castellana in Spain.
(c) Investment and other income
Investment and other income has increased from R61 million (September 2016) to R158 million at
30 September 2017. The increase of R97 million is mainly attributable to the following:
Rm
Net interest earned on interest rate cross-currency swaps after deducting 1% finance costs 32
Additional dividends generated including Gemgrow which company was previously consolidated 50
Additional sundry income 9
(d) Finance costs
Group finance costs have decreased by R39.4 million from R211 million to R171.6 million. The decrease in
finance costs is primarily due to interest in respect of Synergy Income Fund Limited (Synergy) in the prior
period of R46 million, excluded in the current period, as Gemgrow Properties Limited (Gemgrow, previously
Synergy) is now reflected as a listed investment and was previously consolidated. This decrease is offset by
additional finance costs incurred in the financing of the acquisition of the 11 retail parks in Spain in
June 2017.
The weighted cost of funding forecast twelve months forward is as follows:
%
ZAR 9.27
GBP 3.10
EUR 2.12
The weighted average forecast cost of finance equates to approximately 5.58%, with 93.6% of interest-bearing
term debt hedged.
(e) Taxation
The first six month’s tax accrual of R8.97 million is higher than the comparable period of R2.5 million, as a
result of a positive timing difference of R3 million arising in the prior period which is not repeated.
Furthermore, a 10% withholding tax on interest paid by the Namibian subsidiaries to its holding company in South
Africa did not apply in the prior period, adding a further R3.5 million to the Namibian tax charge.
4. INVESTMENTS IN LISTED PROPERTY OWNING COMPANIES
Fairvest Property Holdings Limited (Fairvest)
Fairvest is fair valued at 30 September 2017 at R520.7 million at R2.05 per share, representing a capital
appreciation of 34% over the cost of the investment.
Dividends received for the six months ended 30 September 2017 amount to R12.6 million. Based on the public
guidance provided by Fairvest management, it is anticipated that further dividends of R40.6 million will be
received or accrued for the period to 31 March 2018.
Atlantic Leaf (associate)
Vukile holds a 34.9% shareholding in Atlantic Leaf (March 2017: 29.6%) following its participation in an equity
raise in September 2017 at a cost of R407 million, funded out of cash resources. Vukile currently holds
65.95 million shares in Atlantic Leaf. The participation in the accelerated bookbuild by Vukile increased its
shareholding in ALP to 34.9%, thereby triggering a mandatory offer to shareholders in terms of Mauritian take-over
law (>30%). Shareholders holding 52% of ALP have agreed not to take up the mandatory offer which closes on Friday,
8 December 2017.
In terms of International Financial Reporting Standards (IFRS), Atlantic Leaf is regarded as an associate of
Vukile. As such, all dividends received reduce the carrying value of the investment in Atlantic Leaf.
However, as dividends received during the six-month period to 30 September 2017 of R34.4 million are represented
by cash, these dividends are regarded as distributable.
Based on the guidance contained in the prospects statement issued by ALP in October 2017, dividends of R80 million
are anticipated to be received and accrued by Vukile for the period to 31 March 2018.
Gemgrow (formerly Synergy)
Vukile holds 4.69 million (9.99%) and 118.2 million (29.5%) Gemgrow "A" and "B" shares respectively.
Vukile has received dividends during the period amounting to R45.7 million. Further dividends of R50 million
are budgeted to be received and accrued for the period to 31 March 2018 in terms of public guidance issued by
Gemgrow management.
Castellana
Vukile announced on 3 July 2017 that its subsidiary, Castellana, had acquired 11 retail parks at a cost of
€193 million, together with other net assets for €2.5 million, at an attractive pre-gearing yield of 6.2%.
Vukile financed the equity portion of the acquisition by participating in an equity raise by Castellana,
increasing its shareholding to 98.3%.
The portfolio is well diversified across Spain (none of the properties are situated in Catalonia) and comprises
high-quality retail parks with solid long-term trading histories. The low-average base rentals provide room for
income growth going forward.
Castellana has also employed a very dynamic team, headed by Alfonso Brunet, who has a wealth of experience in
the Spanish retail sector.
5. BORROWINGS
Group interest-bearing debt of R6.2 billion is made up as follows:
ZAR EUR GBP Total
Loans (Rbn) 2.9 2.8 0.5 6.2
In total, R223 million of new forward exchange contracts (FECs) and R1.346 billion cross-currency interest
rate swaps (CCIRS) have been concluded since the commencement of the financial year. Foreign currency loans
of €58.2 million were raised as funding for the equity investment into Castellana and utilised to partially
fund the acquisition of 11 retail parks in Spain on 28 June 2017.
Details of GBP and Euro currency loans raised are set out below:
Vukile Vukile Castellana Group Total
GBP EUR EUR EUR foreign
debt debt debt debt debt
’000 ’000 ’000 ’000 ’000
Debt drawn £28 700 €71 181 €101 070 €172 251 R3 282 530
Debt expiry profile (years) 2.64 2.79 5.42 4.33 4.07
Interest rate swaps £26 025 €45 681 €67 735 €113 416 R2 290 742
IRS expiry profile (years) 2.60 2.83 3.57 3.27 3.13
Percentage hedged (%) 90.68 64.18 67.02 65.84 69.79
All-in interest rate (%) 3.10 2.58 1.80 2.12 2.28
Debt refinancing during the six months ended 30 September 2017
Bond refinancing
R240 million corporate bond was repaid; and
R260 million of commercial paper was refinanced during the period.
New bond issuance
R72 million corporate bond was issued to fund loans to senior management to facilitate their acquisition of
Vukile shares under the share purchase plan.
Bank refinancing
Repayments
R663 million bank debt was repaid during the period.
Debt expiries
March 2018 2019 2020 2021 2022 2023 2024 2027 2029 Total
Rm 177 1 484 1 055 1 120 1 677 122 150 44 396 6 225
% 3 24 17 18 27 2 2 1 6 100
The Global Credit Rating Company (Pty) Ltd (GCR) has re-affirmed an "A" corporate rating with a positive
outlook for Vukile and an "AA+" (RSA) secured long-term rating and a "A1" short-term rating.
The group has unutilised bank facilities of R489 million at 30 September 2017.
Interest rate hedging
At 30 September 2017, net debt excluding development loans and commercial paper amounted to R5.9 billion.
Swaps totalling R5.5 billion have been concluded equating to 93.6%.
Swaps amounting to R522 million were extended and new swaps totalling R804 million have been concluded since
April 2017, at an estimated annualised additional cost of R132 800.
Swap expiries
March 2018 2019 2020 2021 2022 2023 Total
Rm 182 659 598 1 523 2 000 523 5 485
% 3 12 11 28 36 10 100
The current swaps in place represent 3 years’ cover as compared to 3.1 years’ cover at 31 March 2017.
6. EQUITY ISSUANCE
Vukile issued 34 574 468 shares under an accelerated bookbuild in July 2017 at R18.80 per share, amounting to
R650 million; and
Vukile issued 21 581 975 shares under an election to reinvest a cash dividend in return for shares in June 2017
at R18.15527 per share, amounting to R392 million. This represented a 63% acceptance rate under the election.
7. HEDGING OF FOREIGN INCOME
To minimise the adverse foreign exchange fluctuations on Vukile’s earnings, between 50% and 100% of foreign
dividends are hedged by way of forward currency contracts, CCIRS and by offsetting the foreign dividend income
against the finance costs in respect of foreign currency denominated loans. Vukile’s target is to hedge, on
average, 75% of foreign dividends over a three-year period.
GBP income exposure
November May
2017 2018
Net dividends forecast(I) £2 522 777 £2 588 728
FEC hedge (£1 185 000) (£1 213 000)
Unhedged GBP income £1 337 777 £1 375 728
Hedged GBP income* 47% 47%
(I) After deducting the interest cost of Vukile’s GBP debt.
* FEC hedge/net dividend.
47% of the Atlantic Leaf forecast distribution is hedged over the next two Atlantic Leaf dividend cycles
(including the recent acquisition of 23 740 021 Atlantic Leaf shares in September 2017 which dividends
still have to be hedged). We have chosen a shorter hedging profile for the moment as Brexit uncertainty
has negatively impacted the GBP exchange rate and we will commence extending the hedging profile during
relative GBP currency strength.
EUR income exposure
March September March September March Average
2018 2018 2019 2019 2020
Net dividends €3 301 702 €3 190 982 €3 317 449 €3 372 501 €3 447 917
FEC hedge (€2 822 300) (€2 412 000) (€2 300 000) (€2 300 000) (€2 400 000)
Unhedged EUR income €479 402 €778 982 €1 017 449 €1 072 501 €1 047 917
Percentage EUR income hedged* 85% 76% 69% 68% 70% 74%
* Net dividend after deducting interest costs on Vukile EUR debt and the CCIRS fixed interest costs.
74% of the Castellana forecast net dividends are hedged over the next 2.5 years (next five dividend cycles).
8. RATIO OF CCIRS AS A PERCENTAGE OF FOREIGN INVESTMENT EXPOSURE
CCIRS have the ability to hedge both foreign exchange fluctuations on Vukile’s earnings and asset exposure.
To minimise the impact of unexpected risks at the maturity of the CCIRS, Vukile has chosen to limit the
utilisation of CCIRS to 55% of total international investments, reducing to 45% within a period of one year.
ZAR
Foreign Exchange exposure
currency rate R000
Atlantic Leaf equity value £70 934 951 18.1557 R1 287 875
Castellana property value €224 808 780 16.0316 R3 604 044
Castellana debt (€106 470 140) 16.0316 (R1 706 888)
Total foreign investments €198 672 087 16.0316 R3 185 031
CCIRS nominal value (€93 200 000) 16.0316 (R1 494 145)
CCIRS nominal value/total foreign investments 47% 47%
The fixed interest rate on the three-year CCIRS is 1%.
9. DEVELOPMENTS, ACQUISITIONS AND SALES
Upgrades/redevelopments - R522.4 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:
Phuthaditjhaba: Maluti Crescent
Maluti Crescent, previously known as Setsing Crescent and located in Phuthaditjhaba in the eastern Free State,
was acquired in the Synergy transaction. It has a gross lettable area (GLA) of 21 538m² and the major tenants
are a Spar Superstore, Game, Cashbuild, Clicks, all five major banks and a very strong national fashion
component. The centre is currently being extended and upgraded at a total cost of R338 million. The projected
yield on the total capex is 8.5%.
The centre will be transformed from a strip mall into an almost fully enclosed mall. The multi-level extension
includes new undercover parking and taxi ranks on the ground and mezzanine levels, with 12 357m² of new retail
space on the top level. Tenants in the extension area will include Pick n Pay, Mr Price, additional Foschini
Group outlets and a relocated and enlarged Woolworths. 75% of the leases for the extension area are committed.
The existing centre will be upgraded to complement the new mall. Provision will be made for a new PV cell solar
installation on the roof of the extension.
Flanagan & Gerard, who has extensive experience in shopping centre development, is the development manager.
Bellville: Barons Ford
The new Ford dealership developed for Barloworld Auto in Bellville was successfully completed and the 10-year
lease commenced on 1 August 2017.
The total capex is R35.4 million at a yield of 15.1%.
Durban: Phoenix Plaza upgrade
Phoenix Plaza, with a GLA of 24 351m², has been upgraded at a cost of R35 million. The scope of the project
includes both an internal and external refurbishment, the addition of two new public ablution blocks, with
one specifically dedicated to the taxi commuters and drivers. The project is substantially complete.
Dobsonville Mall: Extension and partial upgrade
Dobsonville Mall, situated in northern Soweto, has been increased from a GLA of 23 177m² to a GLA of 26 655m².
Capex of R114 million was invested to invest in the extension and improvement of this destination mall.
Former offices situated to the northern part of the property measuring 2 544m² were demolished to make way
for an expansion of 6 736m² along the northern side of the mall. This new addition to the mall is anchored
by a 2 500m² Pick n Pay supermarket and all the new shops in the immediate vicinity are fully let. Further
improvements to the mall include a new food court area off the new eastern entrance into the mall and
relocating the medical suites onto a previously underutilised mezzanine floor. The projected net yield is
9.6%.
Current Vukile projects
A summary of major capex projects approved and incurred to 30 September 2017 is set out below:
Approved projects Paid to Budget
30 September October 2017
Approved 2017 to March 2018
Completion R000 R000 R000
Durban: Phoenix Plaza 31 March 2018 35 000 25 097 9 903
Bellville: Barons Ford 30 July 2017 35 400 33 680 1 720
Dobsonville Mall extension 30 November 2017 114 000 107 679 -
Thohoyandou: Thavhani Mall 24 August 2017 367 450 - -
Phuthaditjhaba: Maluti Crescent 30 April 2019 338 000 4 984 26 000
Totals 889 850 171 440 37 623
Developments - R367 million
Thavhani Mall
Vukile secured a 33.3% stake in the 50 637m² Thavhani Mall in Thohoyandou, Limpopo, for R367 million after
concluding a deal with the developers, Thavhani Property Investments (Pty) Ltd, which is owned by Flanagan
& Gerard Property Investment & Development together with local partners. The centre is anchored by Pick n
Pay, Super Spar, Woolworths and Edgars, with a broad range of other national retailers also forming part
of the tenant mix.
The construction of the centre was completed on time and was opened as planned on 24 August 2017. The opening
was a huge success and well received by the local community. The retailers are trading exceptionally well.
The centre is currently 0.9% vacant.
Acquisitions - Spain
Spanish retail portfolio
In June 2017, Castellana, a Spanish REIT and a 98.3% held subsidiary of Vukile, acquired 11 retail parks
located across Spain for an aggregate base purchase consideration of €193 million at an attractive initial
pre-geared property yield of 6.2%. The acquisition is in line with Vukile’s strategy of increasing its
international exposure to developed Europe.
The 11 retail parks have a weighted average lease expiry (WALE) of 17.4 years to expiry. The total GLA of the
portfolio is 117 820m² and 95% of gross revenue is derived from leading Spanish national and international
retail tenants including Media Markt, Sprinter, Worten, Aki and Mercadona. The average monthly rental of
€9.00 per m² across the portfolio is below the market rental of €10 to €12, which provides room for income
growth.
A highly experienced and respected team of Spanish retail property experts has been brought on board to manage
the assets along with a senior manager from Vukile, who will be seconded to Spain to assist with the integration
of the business operations.
Purchase
Weighted price of the
average property
Property Province GLA m² rental per m² €’m
Kinépolis Retail Park and Leisure Centre Granada 25 877 9.2 41.5
Parque Oeste(I) Madrid 13 604 14.8 43.0
Parque Principado Asturias 16 396 9.3 30.0
Marismas Del Polvorín Huelva 20 000 8.0 25.0
La Heredad Badajoz 13 447 6.5 17.5
La Serena(II) Badajoz 12 405 6.8 14.0
Mejostilla Cáceres 7 281 6.5 8.0
Motril Granada 5 559 8.4 7.5
Ciudad del Transporte Castellón 3 250 12.4 6.5
Total 117 820 193.0
(I) This park comprises two adjacent properties that were acquired in two separate companies, but has been
treated as a single combined property for reporting purposes.
(II) This park comprises two adjacent properties that were acquired in two separate companies, but has been
treated as a single combined property for reporting purposes.
Acquisitions - Southern Africa
Jet Bloemfontein
Vukile acquired the property and letting enterprise known as Jet Bloemfontein from Growthpoint Properties Limited
for R38.3 million at an initial yield of 10.25%. It is a single tenant building let solely to Jet and measures
5 516m². The Jet lease has another four years to expiry. The property is linked to the Vukile-owned Bloemfontein
Plaza and is accessed directly from within the centre. Jet Bloemfontein was transferred in September 2017.
Property sales - Southern Africa
In line with the group’s strategy to focus on retail assets, the following two properties were disposed of during
this period:
Sales
price Yield
Property R000 % Date of sale
Pretoria Lynnwood Erf 493 2 900 Vacant land 2 August 2017
Pretoria Hatfield 1166 Francis Baard Street 16 500 8.7 8 September 2017
19 400 8.7
In support of the retail strategy, further sales to the value of R71.0 million were registered post the
reporting period.
Sales
price Yield
Property R000 % Date of registration
Sandton Rivonia Tuscany Place Section 5 12 780 12.8 24 October 2017
Sandton Rivonia Tuscany Place Section 6 4 970 11.2 24 October 2017
Sandton Rivonia Tuscany Place Section 7 7 810 14.1 24 October 2017
Sandton Rivonia Tuscany Place Section 8 19 170 6.1 24 October 2017
Sandton Rivonia Tuscany Place Section 9 14 200 11.6 24 October 2017
Sandton Rivonia Tuscany Place Section 10 12 070 9.6 24 October 2017
71 000 10.2
The following property was sold on auction and transfer is expected in November 2017:
Property Sales
price Yield
R000 % Progress
Hartbeespoort Sediba Shopping Centre 91 500 10.3 A deposit of R9.0 million has been
paid with a guarantee for the remainder
The proceeds from property sales will be used to repay debt, as well as fund potential accretive
acquisitions, both locally and internationally.
Investment properties held for sale - R1.19 billion
The bulk of investment properties held for sale constitutes the Namibian portfolio.
It is intended to redeploy the proceeds from the sale of this portfolio, once concluded, into Spain or the UK.
10. VALUATIONS
Southern Africa 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 southern African property
portfolio at R14.1 billion(I) as at 30 September 2017. This is R1.0 billion or 7.3% higher than the valuation
as at 31 March 2017. The calculated recurring forward yield for the portfolio is a conservative 8.4%.
The external valuations by Quadrant Properties (Pty) Ltd and Knight Frank (Pty) Ltd at 30 September 2017 of
48.8% of the total portfolio are in line with the directors’ valuations of the same properties.
(I) The group’s property portfolio value takes into account Moruleng Mall at 80%, whereas in the financial
statements the group property value reflects 100% of Clidet, the entity which owns Moruleng Mall.
Spanish portfolio
The portfolio comprising 13 properties, including the two call centres acquired in 2016, was valued by Colliers
International at €224.8 million or R3.6 billion at 30 June 2017. The valuations are considered to approximate
the values as at 30 September 2017. The calculated recurring forward yield for the portfolio is 5.4%.
The 11 retail parks were valued at €200 million against a purchase price of €193 million and transaction costs
of €4.7 million.
11. GROUP PROPERTY PORTFOLIO OVERVIEW
Southern Africa portfolio overview
The Southern Africa property portfolio at 30 September 2017 consisted of 68 properties with a total market
value of R14.1 billion, excluding capitalised lease commissions, and GLA of 959 767m², with an average value
of R207 million per property. The southern African retail portfolio which accounts for c.91% of the value of
the assets was valued at R12.8 billion and consists of 47 properties with an average value of R272 million.
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 75% of the gross
income is derived from Gauteng, KwaZulu-Natal, Western Cape and Namibia.
Geographic profile
Total
portfolio
% of gross income %
Gauteng 37
KwaZulu-Natal 23
Namibia 8
Western Cape 7
North West 6
Free State 6
Limpopo 6
Mpumalanga 4
Eastern Cape 3
Based on market value, 91% of the Southern African portfolio is in the retail sector followed by 4% in
the office, 3% in the industrial, 1% in the motor-related and 1% in the residential sectors.
The tenant profile is listed in the table below:
Total
Tenant profile portfolio
% of GLA %
Large national and listed tenants and major franchises 66
National and listed tenants, franchised and medium to large professional firms 11
Other 23
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 46% of total
GLA. Shoprite is the single largest tenant, occupying 8.3% of total GLA with Pick n Pay the second largest
at 6.8% of total GLA.
Top 15 properties by value
Directors’
valuation at
30 September %
GLA 2017 of Valuation
Property Location m² Rm total R/m²
Boksburg East Rand Mall* Gauteng 34 712 1 330 9.5 38 313
Durban Phoenix Plaza KwaZulu-Natal 24 351 831 5.9 34 135
Pinetown Pine Crest KwaZulu-Natal 40 087 828 5.9 20 665
Gugulethu Square Western Cape 25 322 502 3.6 19 837
Soweto Dobsonville Mall Gauteng 26 655 492 3.5 18 471
Queenstown Nonesi Mall Eastern Cape 28 177 436 3.1 15 480
Oshakati Shopping Centre Namibia 24 632 416 3.0 16 899
Durban Workshop KwaZulu-Natal 20 041 405 2.9 20 224
Moruleng Mall# North West 25 137 403 2.9 16 047
Randburg Square Gauteng 40 874 394 2.8 9 637
Phuthaditjhaba Maluti Crescent Free State 21 538 393 2.8 18 247
Thohoyandou Thavhani Mall** Limpopo 16 710 374 2.7 22 363
Germiston Meadowdale Mall*** Gauteng 31 850 372 2.6 11 692
Daveyton Shopping Centre Gauteng 17 774 363 2.6 20 412
Atlantis City Shopping Centre Western Cape 22 115 323 2.3 14 628
Total top 15 399 975 7 862 56.1 19 656
* Represents an undivided 50% share in this property.
** Represents an undivided 33% share in this property.
*** Represents an undivided 67% share in this property.
# Represents 80% share in the company.
Spanish portfolio overview
The Spanish property portfolio at 30 September 2017 consisted of 13 properties with a total market value
of €224.8 billion, excluding capitalised lease commissions, and GLA of 134 564m², with an average value
of €17.3 million per property.
The geographical and sectoral distribution of the group’s portfolio is indicated in the tables below. Some
80% of the gross income is derived from Madrid, Granada, Asturias and Badajoz.
Geographic profile
Total
portfolio
% of gross income %
Madrid 28
Granada 23
Badajoz 14
Asturias 13
Huelva 12
Cáceres 4
Castellón 3
Seville 3
Based on market value, 89% of the group portfolio is in the retail sector followed by 11% in the office
sector.
The tenant profile is listed in the table below:
Tenant profile
Total
portfolio
% of gross income %
Large national and international tenants 96
Local tenants 4
The top 10 tenants account for 74% of gross income. Konecta is the single largest tenant, occupying 12.9%
of total GLA with Media Markt the second largest at 12.1% of total GLA.
List of total portfolio
Market
GLA value % of total Valuation
Property Province Sector m² €’m portfolio €/m²
Kinépolis Retail Park and Leisure Centre Granada Retail 25 877 44.9 20 1 735
Parque Oeste(I) Madrid Retail 13 604 43.5 19 3 198
Parque Principado Asturias Retail 16 396 31.9 14 1 945
Marismas Del Polvorín Huelva Retail 20 000 25.1 11 1 255
Konecta Madrid Madrid Offices 11 046 19.4 9 1 756
La Heredad Badajoz Retail 13 447 17.8 8 1 326
La Serena(II) Badajoz Retail 12 405 14.4 6 1 158
Mejostilla Cáceres Retail 7 281 8.1 4 1 108
Motril Granada Retail 5 559 8.0 4 1 435
Ciudad del Transporte Castellón Retail 3 250 6.4 3 1 965
Konecta Seville Seville Offices 5 698 5.4 2 944
Total 134 564 224.8 100.0 1 671
(I) This park comprises two adjacent properties that were acquired in two separate companies, but has been
treated as a single combined property for reporting purposes.
(II) This park comprises two adjacent properties that were acquired in two separate companies, but has been
treated as a single combined property for reporting purposes.
12. GROUP PROPERTY PORTFOLIO PERFORMANCE
Southern Africa property portfolio performance
New leases and renewals of 94 444m² with a contract value of R840 million were concluded during the year to
date. Some 85% of leases to be renewed during the six months ended 30 September 2017 were renewed or are in
the process of being renewed.
Details of large contracts concluded
Contract Lease
value duration
Tenant Property Sector Rm Years
Pick n Pay Soweto Dobsonville Mall Retail 146.5 25
Pick n Pay Bloemfontein Plaza Retail 44.3 25
Barloworld South Africa Cape Town Bellville Barons Motor-related 37.8 9
Spar Roodepoort Ruimsig Shopping Centre Retail 35.3 10
Food Lovers Market Soweto Dobsonville Mall Retail 25.1 10
Pick n Pay Liquor Soweto Dobsonville Mall Retail 17.8 25
Dischem Pinetown Pine Crest Retail 15.8 10
Mr Price Pinetown Pine Crest Retail 13.0 5
Pick n Pay Liquor Hammarsdale Junction Retail 12.6 26
BetSA Soweto Dobsonville Mall Retail 12.6 10
The group lease expiry profile table reflects that 16% of the leases are due for renewal in the second half
of the year. Approximately 43% of leases are due to expire in 2021 and beyond (up from 35%).
Group lease expiry
Beyond
March March March March March
% of contractual rent 2018 2019 2020 2021 2021
GLA 16 23 18 12 31
Cumulative as at September 2017 39 57 69 100
Cumulative as at March 2017 25 48 65 75 100
Vacancies
At 30 September 2017, the portfolio’s vacancy (measured as a percentage of GLA) was 4.1% compared to 4.3% at
31 March 2017 and the portfolio’s vacancy (measured as a percentage of gross rental) was 3.7% compared to
4.2% at 31 March 2017. The retail portfolio saw an improvement in vacancies based on gross rental to 3.4%
(March 2017: 3.6%)
GLA summary GLA m²
Balance at 1 April 2017 936 459
GLA adjustments 3 265
Disposals (2 871)
Acquisitions and extensions 22 914
Balance at 30 September 2017 959 767
Vacancy summary Area m² %
Balance at 31 March 2017 40 167 4.3
Less: Properties sold since 31 March 2017 (952) 33.2
Remaining portfolio balance at 31 March 2017 39 215 4.2
Leases expired or terminated early 103 478
Tenants vacated 15 919
Renewal of expired leases (48 812)
Contracts to be renewed (33 623)
Development vacancy (1 725)
New letting of vacant space (35 004)
Balance at 30 September 2017 39 448 4.1
Base rentals (excluding recoveries)
The weighted average monthly base rental rates per sector, between 30 September 2017 and 31 March 2017,
are set out in the table below:
Weighted average base rentals (R/m²) excluding recoveries September March
2017 2017 Escalations
Retail 126.33 122.88 2.8
Offices 94.10 90.25 4.3
Industrial 52.81 51.96 1.6
Motor-related 124.37 135.46 (8.2)
Total 118.62 115.42 2.8
Average contractual rental escalations are 7.3%.
The average escalation on expiry rentals on the total portfolio of 5.4% is positive against the backdrop
of a difficult trading environment. Positive reversions of 5.2% were achieved in the retail sector.
The financial performance of the stable portfolio is set out below:
Financial performance September September
2017 2016
Rm Rm % change
Property revenue 488.3 458.2 6.6
Net property expenses (81.9) (75.1) (9.1)
Net property income 406.4 383.1 6.1
Property expense ratios (%)* 16.8 16.4 (2.4)
* Recurring cost to property revenue ratios (including rates and taxes and electricity costs;
excluding asset management fee).
Expense categories and ratios
The largest expense categories contribute 80% of the total expenses. These are: government services (46%),
rates and taxes (16%), 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 ratio of 16.8% is still in line with the ratio of 16.6% at 31 March 2017.
Spanish property portfolio performance
The lease expiry profile table reflects that no leases are due for renewal in the second half of the year.
Approximately 97% of leases are due to expire in 2021 and beyond.
Lease expiry
Beyond
March March March March March
Vacant 2018 2019 2020 2021 2021
% of GLA % % % % % %
GLA 2.1 0 1 0 4 93
Cumulative as at September 2017 2 3 3 7 100
Vacancies
At 30 September 2017, the portfolio’s vacancy (measured as a percentage of GLA) was 2.1% of which
development vacancy accounted for 1.5% of this vacancy.
Base rentals (excluding recoveries)
The weighted average monthly base rental rates per sector are set out in the table below:
Weighted average base rentals (€/m²) excluding recoveries September
2017
Retail 9.00
Offices 9.05
Total 9.01
Contractual rental escalations in the European market are CPI linked.
13. DECLARATION OF A CASH DIVIDEND WITH THE ELECTION TO REINVEST THE CASH DIVIDEND IN RETURN FOR VUKILE SHARES
Notice is hereby given of a dividend amounting to 72.65350 cents per share, out of distributable income,
for the six-month period to 30 September 2017.
Shareholders will be entitled to elect (in respect of all or part of their holding) to reinvest the cash
dividend of 72.65350 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 Tuesday, 28 November 2017.
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 72.65350 cents per share meets the requirements of a qualifying dividend for the
purposes of section 25BB of the Income Tax Act (a qualifying dividend) with the result that:
- qualifying dividends 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 dividend is taxable as income in the hands of the Vukile shareholder.
These qualifying dividends are, 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; and
- 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 above mentioned
documents to be submitted prior to payment of the dividend, if such documents have not already been submitted.
- qualifying dividends 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 dividends
received by non-residents were not subject to dividends withholding tax. Qualifying dividends are subject
to dividends withholding tax at 20%, 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 20%, the net dividend amount due to
non-resident shareholders is 58.12280 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; and
- 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 above mentioned
documents to be submitted prior to payment of the dividend 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 dividend amount of 72.65350 cents per share.
Shareholders are further advised that:
- the issued capital of Vukile is 758 041 475 no par value shares at 30 September 2017; and
- 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
advisers 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:
Salient dates and times 2017
Circular and form of election posted to shareholders Tuesday, 28 November
Finalisation information including the share ratio and price
per share published on SENS Tuesday, 5 December
Last day to trade in order to participate in the election to
receive the share reinvestment alternative or to receive a cash dividend (LDT) Tuesday, 12 December
Shares trade ex dividend Wednesday, 13 December
Listing of maximum possible number of shares under the share reinvestment
alternative and trading in new shares commences Friday, 15 December
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, 15 December
Record date for the election to receive the share reinvestment alternative or
to receive a cash dividend (record date) Friday, 15 December
Results of cash dividend and share reinvestment alternative published on SENS Monday, 18 December
Cash dividend cheques posted to certificated shareholders on or about Monday, 18 December
Accounts credited by CSDP or broker to dematerialised shareholders with the
cash dividend payment Monday, 18 December
Share certificates posted to certificated shareholders on or about Wednesday, 20 December
Accounts updated with the new shares (if applicable) by CSDP or broker to
dematerialised shareholders Wednesday, 20 December
Adjustment to shares listed on or about Thursday, 21 December
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 record date, which differs from
the conventional one day after record date settlement process.
2. Shares may not be dematerialised or rematerialised between Tuesday, 12 December 2017 and Friday,
15 December 2017, both days inclusive.
3. The above dates and times are subject to change. Any changes will be released on SENS.
Foreign shareholders
The distribution of this circular and/or accompanying documents and the right to elect shares under the share
reinvestment alternative in jurisdictions other than the Republic of South Africa may be restricted by law and a
failure to comply with any of these restrictions may constitute a violation of the securities laws of any such
jurisdictions. It is the responsibility of each foreign shareholder to satisfy himself as to the full observation
of the laws and regulatory requirements of the relevant foreign jurisdiction in connection with the share
reinvestment alternative. The shares have not been and will not be registered for the purposes of the election
under the securities laws of the United Kingdom, European Economic Area or EEA, Canada, United States of America,
Japan or Australia and accordingly are not being offered, sold, taken up, re-sold or delivered directly or
indirectly to recipients with registered addresses in such jurisdictions.
14. BASIS OF PREPARATION
The condensed consolidated interim financial statements have been prepared in accordance with and
containing the information required by IFRS, 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 the relevant
sections of the South African Companies Act.
All amendments to standards applicable for Vukile’s financial period beginning on 1 April 2017 have been
considered. All accounting policies applied in the preparation of these interim financial statements are
consistent with those applied by Vukile in its consolidated financial statements for the year ended
31 March 2017, other than the adoption of those amendments to standards that become effective in the current
period, which had no impact on the financial results.
Preparation of the condensed consolidated interim financial statements was supervised by Michael Potts CA(SA)
in his capacity as financial director. The condensed consolidated interim financial statements have not been
reviewed or audited by Vukile’s independent external auditors.
15. POST-PERIOD EVENTS
Dividend
Declaration of dividend
In line with IAS 10 - Events after the Reporting Period, the declaration of the dividend of 72.65350 cents
per share in respect of the six-month period to 30 September 2017 amounting to R550.7 million occurred after
the reporting period, resulting in a non-adjusting event that is not recognised in the financial statements.
16. PROSPECTS
Following the successful restructuring of Vukile into a focused Retail REIT in the South African market
and the creation of its Spanish subsidiary, Castellana, Vukile is very well positioned to both weather
the current economic challenges in South Africa while being able to access strong growth opportunities
in Spain and the UK.
Full-year earnings are expected to be in line with the growth achieved in the first half and dividends are
expected to grow by between 7% and 8% for the full year. While still dependent on the local economy not
worsening significantly from current levels, early indications are that the growth of dividends for the next
financial year should be at least 8%.
The forecast growth in dividends is based on the assumption 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.
On behalf of the board
AD Botha LG Rapp
Chairman Chief executive officer
Melrose Estate
27 November 2017
Unaudited condensed consolidated statement of financial position
at 30 September 2017
Unaudited Unaudited Audited
30 September 30 September 31 March
2017 2016 2017
GROUP R000 R000 R000
ASSETS
Non-current assets 19 663 689 13 469 354 15 850 308
Investment properties 16 285 059 11 502 598 13 168 339
Investment properties 16 607 207 12 026 349 13 497 445
Straight-line rental income adjustment (322 148) (523 751) (329 106)
Other non-current assets 3 378 630 1 966 756 2 681 969
Straight-line rental income asset 322 148 523 751 329 106
Equity investments 1 357 556 375 433 1 366 239
Investment in associate 1 290 589 636 959 780 347
Investment properties under development 150 598 188 239 51 191
Goodwill 64 797 158 372 63 009
Furniture, fittings, computer equipment and
other intangible assets 13 240 2 720 14 049
Available-for-sale financial asset 42 785 32 364 23 855
Derivative financial instruments - 788 1 722
Long-term loans granted 109 360 38 110 38 110
Deferred taxation assets 27 557 10 020 14 341
Current assets 684 712 1 686 552 1 589 768
Trade and other receivables 240 931 215 702 256 405
Derivative financial instruments 489 227 1 752
Current taxation assets 2 123 1 666
Cash and cash equivalents 443 290 1 470 500 1 329 945
Investment properties held for sale 1 189 508 2 936 080 76 632
Total assets 21 537 909 18 091 986 17 516 708
EQUITY AND RESERVES
Equity attributable to owners of the parent 14 534 204 12 786 552 13 111 425
Non-controlling interest 82 672 565 616 73 367
Non-current liabilities 5 264 179 2 774 438 2 964 638
Other interest-bearing borrowings 5 023 096 2 750 209 2 937 590
Derivative financial instruments 231 896 24 229 26 115
Deferred taxation liabilities 9 187 - 933
Current liabilities 1 656 854 1 965 380 1 367 278
Trade and other payables 539 825 396 781 354 370
Borrowings 1 112 475 1 565 829 1 002 581
Derivative financial instruments - 1 346 -
Current taxation liabilities 4 554 1 424 8 892
Shareholder for dividend - - 1 435
Total equity and liabilities 21 537 909 18 091 986 17 516 708
Net asset value (cents per share)(1) 1 917 1 851 1 868
(1) Excluding non-controlling interest.
Unaudited condensed consolidated statement of profit and loss and other comprehensive income
for the six months ended 30 September 2017
Unaudited Unaudited Audited
30 September 30 September 31 March
2017 2016 2017
GROUP R000 R000 R000
Property revenue 942 840 1 087 344 1 964 202
Straight-line rental income accrual 4 947 (57 379) (161 077)
Gross property revenue 947 787 1 029 965 1 803 125
Property expenses (339 976) (382 111) (717 970)
Net profit from property operations 607 811 647 854 1 085 155
Corporate and administrative expenses (56 801) (51 653) (96 155)
Investment and other income 158 006 61 038 198 523
Operating profit before finance costs 709 016 657 239 1 187 523
Finance costs (171 601) (210 968) (362 074)
Profit before capital items 537 415 446 271 825 449
Profit/(loss) on sale of investment properties 4 134 (65 316) 25 250
Profit on sale of furniture and equipment 43 - 92
Fair value (loss)/gain on listed property securities (37 740) 47 186 105 739
Fair value movement of derivative financial instruments (3 961) (6 337) (6 251)
Foreign exchange (loss)/profit (103 054) 60 768 83 679
Profit on sale of subsidiary - - 54 813
Loss of control of subsidiary - - (276 781)
Realised loss on interest rate hedge - (635) -
Other capital items (248) - (971)
Goodwill written off on sale of properties by a subsidiary - - (3 889)
Cost of acquisition of business combination - - (66)
Profit before fair value adjustments 396 589 481 937 807 064
Fair value adjustments 558 501 388 062 693 521
Gross change in fair value of investment properties 563 448 330 683 532 444
Straight-line rental income adjustment (4 947) 57 379 161 077
Profit before equity-accounted investment 955 090 869 999 1 500 585
Profit share of associate 34 358 28 228 45 251
Profit before taxation 989 448 898 227 1 545 836
Taxation (8 986) (2 510) (9 286)
Profit for the period 980 462 895 717 1 536 550
Profit attributable to:
Owners of the parent 975 787 863 021 1 499 420
Non-controlling interests 4 675 32 696 37 130
Other comprehensive income/(loss)
Items that will be reclassified subsequently to profit or loss
Currency gain/(loss) on translation of investment in
foreign entities 231 200 (118 047) (157 781)
Cash flow hedges (26 850) (60 839) (39 323)
Available for sale financial assets - current period loss (8 924) (6 697) (15 206)
Other comprehensive income/(loss) for the period 195 426 (185 583) (212 310)
Total comprehensive income for the period 1 175 888 710 134 1 324 240
Total comprehensive income attributable to:
Owners of parent 1 168 882 677 438 1 287 981
Non-controlling interest 7 006 32 696 36 259
Basic and diluted earnings per share (cents) 136.72 130.07 217.93
Weighted average number of shares in issue 713 695 323 663 514 893 688 024 118
Number of shares in issue 758 041 475 690 643 418 701 885 532
Vukile has no dilutionary shares in issue
Unaudited reconciliation of earnings to headline earnings
for the six months ended 30 September 2017
Unaudited Unaudited Audited
30 September 2017 30 September 2016 31 March 2017
Cents Cents Cents
Group per Group per Group per
R000 share R000 share R000 share
Attributable profit to owners of the parent 975 787 136.72 863 021 130.07 1 499 420 217.93
Earnings per share 975 787 136.72 863 021 130.07 1 499 420 217.93
Change in fair value of investment properties
(net of allocation to non-controlling interest) (560 427) (78.52) (375 298) (56.56) (676 899) (98.38)
Write-off of goodwill on sale of properties
sold by a subsidiary - - - - 3 889 0.56
(Profit)/loss on sale of investment properties (4 134) (0.58) 65 316 9.84 (25 250) (3.67)
Profit on sale of furniture, fittings,
computer equipment and other (43) (0.01) - - (92) (0.01)
Profit on sale of subsidiaries - - - - (54 813) (7.97)
Loss of control of subsidiary - - - - 276 781 40.23
Fair value earnings of associate-adjusted
headline earnings - - - - 16 804 2.44
Headline earnings of shares 411 183 57.61 553 039 83.35 1 039 840 151.13
Weighted average number of shares in issue 713 695 323 663 514 893 688 024 118
Headline and diluted headline earnings per share 57.61 83.35 151.13
Unaudited condensed consolidated statement of cash flow
for the six months ended 30 September 2017
Unaudited Unaudited Audited
30 September 30 September 31 March
2017 2016 2017
GROUP R000 R000 R000
Cash flow from operating activities 571 156 650 543 1 104 588
Cash flow from investing activities (2 282 336) 1 005 786 429 231
Cash flow from financing activities 814 895 (1 118 288) (1 135 957)
Net increase in cash and cash equivalents (896 285) 538 041 397 862
Foreign currency movements in cash 9 630 - (376)
Cash and cash equivalents at the beginning of the period 1 329 945 932 459 932 459
Cash and cash equivalents at the end of the period 443 290 1 470 500 1 329 945
Major items included in the above:
Cash flow from operating activities
Profit before tax 989 448 898 227 1 545 836
Adjustments (431 826) (233 220) (378 051)
Cash flow from investing activities
Acquisition of and improvements to investment properties (566 298) (263 836) (3 466 306)
Investment in associate (417 829) - (180 677)
Additional investment in a subsidiary (1 538 855) - -
Net proceeds on sale of investment properties 19 925 1 201 206 4 113 776
Cash flow from financing activities
Issue of shares 1 038 004 709 093 902 251
Dividends paid (627 940) (581 816) (1 049 031)
Finance costs (167 521) (210 968) (355 763)
Interest-bearing borrowings (repaid)/advanced 635 911 (1 033 252) (622 474)
Unaudited condensed consolidated statement of changes in equity
for the six months ended 30 September 2017
Share
capital Non-
and share distributable Retained
R000 premium reserves earnings
Group
Balance at 30 September 2016 7 777 656 4 506 434 502 462
Issue of capital 193 158 - -
Dividend distribution - - (467 215)
7 970 814 4 506 434 35 247
Profit for the period - - 636 399
Change in fair value of investment properties - 201 761 (201 761)
Change in fair value of investment properties
attributable to non-controlling interest - (3 858) 3 858
Share-based remuneration - 8 707 -
Deferred taxation on change in fair value of
derivatives - (14 411) -
Transfer to non-distributable reserve - 189 210 (189 136)
Non-controlling interest recognised in respect
of a subsidiary acquired - - -
Share issue expenses of a subsidiary - (7 111) -
Loss of control of a subsidiary - (231 623) 232 751
Revaluation of investments - 58 553 (58 553)
Other comprehensive loss - (25 856) -
Balance at 31 March 2017 7 970 814 4 681 806 458 805
Issue of capital 1 038 004 - -
Dividend distribution - - (625 411)
9 008 818 4 681 806 (166 606)
Profit for the period - - 975 787
Change in fair value of investment properties - 563 448 (563 448)
Change in fair value of investment properties
attributable to non-controlling interest - (3 021) 3 021
Share-based remuneration - 9 938 -
Deferred taxation on change in fair value of derivatives - 690 -
Transfer from non-distributable reserve - (98 920) 98 920
Fair value movement on cross currency interest rate swaps - (162 784) -
Share issue expenses of a subsidiary - (2 787) -
(Loss)/gain on change of shareholding in a subsidiary - (3 753) -
Revaluation of investments - (37 740) 37 740
Other comprehensive income - 193 095 -
Balance at 30 September 2017 9 008 818 5 139 972 385 414
Unaudited condensed consolidated statement of changes in equity continued
for the six months ended 30 September 2017
Non-
Shareholders’ controlling
R000 interest interest Total
Group
Balance at 30 September 2016 12 786 552 565 616 13 352 168
Issue of capital 193 158 - 193 158
Dividend distribution (467 215) (1 435) (468 650)
12 512 495 564 181 13 076 676
Profit for the period 636 399 4 434 640 833
Change in fair value of investment properties - - -
Change in fair value of investment properties
attributable to non-controlling interest - - -
Share-based remuneration 8 707 - 8 707
Deferred taxation on change in fair value of
derivatives (14 411) - (14 411)
Transfer to non-distributable reserve 74 - 74
Non-controlling interest recognised in respect
of a subsidiary acquired - 26 855 26 855
Share issue expenses of a subsidiary (7 111) (3 829) (10 940)
Loss of control of a subsidiary 1 128 (517 403) (516 275)
Revaluation of investments - - -
Other comprehensive loss (25 856) (871) (26 727)
Balance at 31 March 2017 13 111 425 73 367 13 184 792
Issue of capital 1 038 004 - 1 038 004
Dividend distribution (625 411) - (625 411)
13 524 018 73 367 13 597 385
Profit for the period 975 787 4 675 980 462
Change in fair value of investment properties - - -
Change in fair value of investment properties
attributable to non-controlling interest - - -
Share-based remuneration 9 938 - 9 938
Deferred taxation on change in fair value of derivatives 690 - 690
Transfer from non-distributable reserve - - -
Fair value movement on cross currency interest rate swaps (162 784) - (162 784)
Share issue expenses of a subsidiary (2 787) (48) (2 835)
(Loss)/gain on change of shareholding in a subsidiary (3 753) 2 347 (1 406)
Revaluation of investments - - -
Other comprehensive income 193 095 2 331 195 426
Balance at 30 September 2017 14 534 204 82 672 14 616 876
Summarised 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 six-month period to 30 September 2017, there has been a change from prior periods in
the measurement methods used to determine key operating segments and reported segment profits.
The executive committee (Exco), the group’s operating decision-making forum, driven by its
international strategy and the fact that in excess of 90% of the southern Africa portfolio is
retail, has taken a decision to measure operating segments and reported segment profits on a
geographical basis, initially:
- Southern Africa;
- Spain; and
- United Kingdom.
The results of the operating segments are reviewed regularly by Exco to assess performance and
decisions to allocate capital to each of the segments.
Operating segment analysis
for the six months ended 30 September 2017
Total
South United Total
Retail Other Africa Kingdom Spain group
GROUP R000 R000 R000 R000 R000 R000
Group income for the six months ended
30 September 2017
Property revenue(I) 597 495 65 440 662 935 - 65 659 728 594
Straight-line rental income accrual 1 191 139 1 330 - 3 617 4 947
598 686 65 579 664 265 - 69 276 733 541
Property expenses (net of recoveries)(I) (112 035) (8 949) (120 984) - (4 746) (125 730)
Profit from property and other operations 486 651 56 630 543 281 - 64 530 607 811
Profit from associate - - - 34 358 - 34 358
(I) The property revenue and property
expense have been reflected net of
recoveries in terms of the Best Practice
Recommendations of the SA REIT association.
The unaudited condensed consolidated
statement of profit and loss reflects
gross property revenue and gross property
expenses.
Group statement of financial position
at 30 September 2017
Assets
Investment properties 11 770 676 1 210 891 12 981 567 - 3 604 044 16 585 611
Add: Lease commissions 19 914 1 682 21 596 - - 21 596
11 790 590 1 212 573 13 003 163 - 3 604 044 16 607 207
Goodwill 48 218 48 218 - 16 579 64 797
Investment properties held for sale 1 118 508 71 000 1 189 508 - - 1 189 508
12 957 316 1 283 573 14 240 889 - 3 620 623 17 861 512
Add: Excluded items
Investment property under development 150 598 150 598 - - 150 598
Equity investments 1 357 556 - - 1 357 556
Investment in associate 1 290 589 - 1 290 589
Furniture, fittings, computer equipment
and other intangible assets 13 066 - 174 13 240
Available-for-sale financial asset 42 785 - - 42 785
Derivative financial instruments 489 - - 489
Loans receivable 88 897 - 20 463 109 360
Deferred taxation assets 27 557 - - 27 557
Trade and other receivables 211 306 - 29 625 240 931
Taxation refundable 2 - - 2
Cash and cash equivalents 345 840 - 97 450 443 290
Total assets 16 478 985 1 290 589 3 768 335 21 537 909
Equity and liabilities
Stated capital 6 589 824 2 418 994 9 008 818 - - 9 008 818
Interest-bearing borrowings 4 488 084 27 171 4 515 255 - 1 620 316 6 135 571
11 077 908 2 446 165 13 524 073 - 1 620 316 15 144 389
Add: Excluded items
Other components of equity and
retained earnings 5 515 984 9 402 5 525 386
Non-controlling interest 49 765 32 907 82 672
Derivative financial instruments 231 896 - 231 896
Deferred taxation liabilities 9 187 - 9 187
Trade and other payables 539 825 - 539 825
Current taxation liabilities 4 347 207 4 554
Total equity and liabilities 19 875 077 - 1 662 832 21 537 909
Operating segment analysis continued
restated for the six months ended 30 September 2016
Total
South United Total
Retail Other Africa Kingdom Spain group
GROUP R000 R000 R000 R000 R000 R000
Group income for the six months ended
30 September 2016
Property revenue(I) 531 728 278 753 810 481 - - 810 481
Straight-line rental income accrual (35 759) (21 620) (57 379) - - (57 379)
495 969 257 133 753 102 - - 753 102
Property expenses (net of recoveries)(I) (89 557) (15 691) (105 248) - - (105 248)
Profit from property and other operations 406 412 241 442 647 854 - - 647 854
Profit from associate - - - 28 228 - 28 228
(I) The property revenue and property
expense have been reflected net of
recoveries in terms of the Best Practice
Recommendations of the SA REIT association.
The unaudited condensed consolidated
statement of profit and loss reflects
gross property revenue and gross
property expenses.
Group statement of financial position
at 30 September 2016
Assets
Investment properties 10 843 602 1 142 808 11 986 410 - - 11 986 410
Add: Lease commissions 39 939 - - 39 939
12 026 349 - - 12 026 349
Goodwill/intangible asset 146 552 11 820 158 372 - - 158 372
Investment properties held for sale 61 887 2 874 193 2 936 080 - - 2 936 080
11 052 041 4 028 821 15 120 801 - - 15 120 801
Add: Excluded items
Investment property under development 188 239 - - 188 239
Equity investments 375 433 - - 375 433
Investment in associate - 636 959 - 636 959
Furniture, fittings and computer equipment 2 720 - - 2 720
Available-for-sale financial asset 32 364 - - 32 364
Derivative financial instruments 1 015 - - 1 015
Loans receivable 38 110 - - 38 110
Deferred taxation assets 10 020 - - 10 020
Trade and other receivables 215 702 - - 215 702
Taxation refundable 123 - - 123
Cash and cash equivalents 1 470 500 - - 1 470 500
Total assets 17 455 027 636 959 - 18 091 986
Equity and liabilities
Stated capital 5 683 979 2 093 677 7 777 656 - - 7 777 656
Interest-bearing borrowings 3 154 198 1 161 840 4 316 038 - - 4 316 038
8 838 177 3 255 517 12 093 694 - - 12 093 694
Add: Excluded items
Other components of equity and retained
earnings 5 021 660 - 5 021 660
Non-controlling interest 552 852 - 552 852
Derivative financial instruments 25 575 - 25 575
Trade and other payables 396 781 - 396 781
Current taxation liabilities 1 424 - 1 424
Total equity and liabilities 18 091 986 - - 18 091 986
Operating segment analysis continued
for the six months ended 30 September 2017
Reconciliation of distributable earnings
September September
2017 2016 Variance
R000 R000 %
Property revenue 729 334 810 481 (10)
Property expenses (net of recoveries) (126 470) (105 248) (20)
Net profit from property operations per
segmental report excluding straight-line
rental income accrual 602 864 705 233 (15)
Corporate administration expenses (56 801) (51 653) (10)
Investment and sundry income 158 006 61 038 159
Operating profit before finance costs 704 069 714 618 (1)
Finance costs (171 601) (210 968) (19)
Profit before taxation 532 468 503 650 6
Taxation (8 986) (2 510) >(100)
Profit for the period 523 482 501 140 4
Profit share of associate 34 358 28 228 5
Profit for the period 557 840 529 368 5
Other capital items (248) (635) (61)
Net profits attributable to
non-controlling interests (1 654) (19 932) 92
Attributable to Vukile group 555 938 508 801 9
Less: Distribution on shares issued
post 31 March 2016 - (19 675) >100
Non-IFRS adjustments
Shares issued cum dividend 22 588 27 366 (17)
Dividends accrued on investments Note 1 - 5 620 >(100)
Asset management income - 4 000 >(100)
Available for distribution 578 526 526 112 10
Proposed dividend 550 744
Number of shares in issue at 30 September 2017 758 041 475
Distribution per share 72.65350
Note
1. Non-IFRS dividend accruals will be finalised at year end.
Notes to the condensed financial statements for the six months ended 30 September 2017
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:
September 2017 September 2016
Level 1 Level 2 Total Level 1 Level 2 Total
GROUP R000 R000 R000 R000 R000 R000
ASSETS
Investments 1 357 556 - 1 357 556 375 433 - 375 433
Available-for-sale financial assets 71 519 - 71 519 55 294 - 55 294
Derivative financial instruments - 489 489 - 1 015 1 015
Total 1 429 075 489 1 429 564 430 727 1 015 431 742
LIABILITIES
Available-for-sale financial liabilities - (28 734) (28 734) - (22 930) (22 930)
Derivative financial instruments - (231 896) (231 896) - (25 575) (25 575)
Total - (260 630) (260 630) - (48 505) (48 505)
Net fair value 1 429 075 (260 141) 1 168 934 430 727 (47 490) 383 237
March 2017
Level 1 Level 2 Total
GROUP R000 R000 R000
ASSETS
Investments 1 366 239 - 1 366 239
Available-for-sale financial assets 55 342 - 55 342
Derivative financial instruments - 3 474 3 474
Total 1 421 581 3 474 1 425 055
LIABILITIES
Available-for-sale financial liabilities - (31 487) (31 487)
Derivative financial instruments - (26 115) (26 115)
Total - (57 602) (57 602)
Net fair value 1 421 581 (54 128) 1 367 453
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 swap and forward exchange contracts are determined by ABSA Capital, Rand Merchant
Bank, Standard Bank, Nedbank 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 and forward exchange contracts.
1.2 Non-financial assets
The following table reflects the levels within the hierarchy of non-financial assets measured at fair value at:
September September March
2017 2016 2017
Level 3 Level 3 Level 3
GROUP R000 R000 R000
ASSETS
Investment properties 16 607 207 12 026 349 13 497 445
Investment properties held for sale 1 189 508 2 936 080 76 632
Fair value measurement of non-financial assets (investment properties)
The fair value of commercial buildings is 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, all of which are unobservable, 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 of the southern Africa portfolio
at 30 September 2017 were:
- The range of the reversionary capitalisation rates applied to the portfolio is between 7.8% and 15.1%
(March 2017: between 8.0% and 15.7%) with the weighted average being 9.1% (March 2017: 9.1%).
- The discount rates applied range between 12.8% and 19.6% (March 2017: between 12.8% and 19.6%) with the
weighted average being 13.9% (March 2017: 14.0%).
In determining future cash flows for valuation purposes, vacancies are forecast for each property based
on estimated demand.
Sensitivity analysis
The effect on the fair value of the southern Africa portfolio of a 0.25% increase in the discount rate would
result in a decrease in the fair value of R392 million (2.8%) (March 2017: R370 million (2.8%)). The average
discount rate on the portfolio would increase from 13.9% to 14.2% (March 2017: 14.3%) and the average exit
capitalisation rate would increase from 9.1% to 9.3% (March 2017: 9.4%) due to the interlinked nature of the
rates. The analysis has been prepared on the assumption that all other variables remain constant.
The inputs used in the valuations of the Spanish portfolio at 30 June 2017 were:
- The range of the reversionary capitalisation rates applied to the portfolio is between 5.7% and 9.5% with
the weighted average being 6.5%.
- The discount rates applied range between 7.4% and 10.3% with the weighted average being 8.4%.
In determining future cash flows for valuation purposes, vacancies are forecast for each property band on
estimated demand.
1.3 Investments outside South Africa
The relevant exchange rates used to convert to Rand at the respective dates were as follows:
Spot rates at Spot rates at
30 September 2017 30 September 2016
Euro 16.0316 -
Sterling 18.1557 17.8303
Corporate vision
At Vukile we aspire to be a leading international REIT generating sustainable growth in earnings and superior returns
for our stakeholders through our portfolio optimisation, data-driven asset management, active dealmaking, conservative
financial management and the provision of a top-quality experience for our tenants and their customers in our
predominantly retail portfolio.
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
Registered office: Ground floor, One-on-Ninth, Cnr Glenhove Road and Ninth Street, Melrose Estate, 2196
Company secretary: J Neethling
Transfer secretaries: Link Market Services South Africa (Pty) Ltd,19 Ameshoff Street, Braamfontein, Johannesburg
Investor and media relations: Marketing Concepts, 10th Floor, Fredman Towers, 13 Fredman Drive, Sandton, Johannesburg,
South Africa, Telephone +27 11 783 0700, Fax +27 11 783 3702
www.vukile.co.za
Date: 27/11/2017 07:49:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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