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Unaudited condensed interim financial statements, financial effects and withdrawal of cautionary
Vukile Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2002/027194/06)
ISIN: ZAE000056370
JSE Share code: VKE
NSX Share code: VKN
UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS AND RESULTS
for the six months ended 30 September 2012 and the Financial Effects relating to the East Rand Mall 50% acquisition and
withdrawal of cautionary
* Distribution for the six months 5.0% higher than the comparable period
* Overall cost of funding reduced from 9.36% at 31 March 2012 to
8.60% per annum, inclusive of margins and costs
* Ranked top property fund and first in the industrial and office sectors
by IPD over a three year period
* Continued strong operational performance of the property portfolio
* Improved quality of the portfolio through:
* Acquisition of R1.48 billion quality office and retail portfolio
* Acceptance of offer for acquisition of 50% of East Rand Mall for R1.1 billion
* Realisation of R225 million on sales of higher risk properties
* Identification of further non-core properties for sale for R427 million
* Additional acquisitions of c.R500 million in pipeline
COMMENTS
1. Nature of operations
The group is a long-term investor in commercial properties with strong contractual cash flows for long-term sustainability and
capital appreciation.
2. Basis of preparation
The unaudited condensed interim financial statements (“interim financial statements”) for the six months ended 30 September
2012, and comparative information, have been prepared in accordance with and containing the information required by IAS 34
(Interim Financial Reporting), International Financial Reporting Standards (“IFRS”), AC 500 Standards as issued by the
Accounting Practices Board, the JSE Listings Requirements and relevant sections of the South African Companies Act. The interim
financial statements have been prepared in accordance with the accounting
policies adopted in the last annual financial statements for the year ended 31 March 2012, other than the change in the
accounting policy relating to deferred taxation. The company has adopted the amendments to IAS12 published on 20 December 2010.
The effect is that deferred taxation on investment properties is now calculated at the capital gains tax rate as opposed to a
blended rate, on the assumption that the carrying value of the investment properties will be recovered through sale. The
interim financial statements, which have been approved for issue by the board of directors on 23 November 2012, have not been
reviewed or audited by the company’s external auditors. The preparation of the financial results for the six months ended 30
September 2012 was supervised by Michael Potts, CA (SA), financial director.
3. Significant event and transactions
During this reporting period, the following significant transactions were effected:
* The acquisition of a R1.48 billion portfolio – refer to paragraph 6 for further details;
* The refinancing of the previous R1.02 billion CMBS debt through the issue of R1.02 billion corporate bonds in terms of a R5
billion Domestic Medium Term Note (“DMTN”) programme – refer to paragraph 5 for further details; and
* The refinancing of a R450 million bank facility – refer to paragraph 5 for further details.
4. Summary of Financial Performance
The directors of Vukile are pleased to report that the distribution for the six months ended 30 September 2012 has increased by
5.0% from 54.314 to 57.030 cents per linked unit.
The group’s net profit available for distribution amounted to R268.5 million for the six months to 30 September 2012 (2011: R193
million), which represents an increase of 39% over the comparable period. Approximately 87% of available profits will be
distributed as the first distribution. As will be reported later, the six months results to 30 September 2012 have been
distorted by a R44 million sales commission earned in April 2012, following the sale of a R1.48 billion office and retail
portfolio by Sanlam. A significant portion of sales commission income will be carried forward to the second half distribution.
The intangible asset which arose on the acquisition of the property asset management business from Sanlam in 2010 has been
tested for impairment. Sales from the Sanlam portfolio for the 13 months to 30 April 2013 will exceed R3.7 billion (generating
sales commission for Vukile of R111 million), which will result in lower asset management fees in the future.
This has resulted in an impairment of R30 million in the intangible asset, from R267.1 million at 31 March 2012 to R237.1
million at 30 September 2012.
Summary of financial performance
30 September 30 September 31 March
2012 2011 2012
Net asset value per
linked unit (cents) 1 263 1 187 1 193
Distribution per
linked unit (cents) 57.030 54.314 124.810
Loan to value ratio (%) 29.2 28.7 27.6
A simplified statement of comprehensive income is set out below:
30 September 30 September
2012 2011
Group Group Paragraph Variance
R000 R000 reference %
Gross rental income and
recoveries 574 139 442 667 30%
Property expenses (228 099) (166 458) 37%
Net profit from
property operations 346 040 276 209 a 25%
Asset management business 45 295 9 101 b 398%
Asset management fees 15 889 16 634 (4%)
Sales commission 43 793 6 339 591%
Expenditure (14 387) (13 872) 4%
Corporate administrative
expenses (14 510) (10 667) c 36%
Finance costs net of
investment income (92 260) (74 950) d 23%
Tax (16 031) (6 682) 140%
Distributable income 268 534 193 011 39%
a. Net profit from property operations
* The property portfolio has performed in line with expectations for the six months ended 30 September 2012, in a difficult
economic environment.
* The group’s net rental income, exclusive of straight-line rental accruals, has increased by 25% over the comparable period
from R276.2 million to R346 million. The major part of this increase has arisen from the R1.48 billion acquisition on 25 April
2012.
* On a like-for-like (stable portfolio) basis, net property revenue has increased by 5.8% over the comparable period.
Further details of the property portfolio performance are set out in paragraph 7.
b. Asset management business
Asset management fee income is 4% lower than the comparable period following the disposal of the R1.48 billion portfolio in
April 2012, which has led to a lower base on which to calculate on-going annuity asset management fees. Sales commission has
increased by 591% over the comparable period as the abovementioned sale of the R1.48 billion
portfolio has generated sales commission of R44 million, before selling expenses. Asset management expenditure has been well
contained at a 4% increase over the comparable period.
c. Corporate administrative expenditure
Corporate administration expenses have increased by 5% over the comparable period and hence have been well contained, after
taking into account the adjustments reflected below:
* A credit of a R1.9 million short-term bonus (reversal of a provision) in the comparable period.
* A R1.25 million accrual for short-term bonuses for the six months to 30 September 2012.
d. Finance costs net of investment income
Net finance costs have increased by R17.3 million over the comparable period. Additional interest on R612 million debt raised
to partly finance the R1.48 billion portfolio acquisition contributed an additional interest charge of R20 million, offset by
the benefit of lower finance costs achieved from the issue of corporate bonds under the DMTN programme and additional interest
earned on surplus cash arising from property sales.
5. Borrowings
During April 2012, 3 to 5 year debt of R612 million was raised to finance a portion of the R1.48 billion portfolio acquisition.
R490 million of this debt was fully hedged at an average all-in cost of finance of 8.58%.
During May 2012, R1.02 billion CMBS debt was successfully replaced with the issue of R1.02 billion corporate bonds in terms of a
R5 billion DMTN programme as follows:
Rm Margin
3 year bonds 580 1.30%
4 year bonds 200 1.54%
5 year bonds 240 1.55%
1 020
This debt has been fully hedged. The all-in finance cost of bonds issued, including margins and debt raising costs, amounts to
8.74%.
During July 2012 a bank facility of R450 million was successfully refinanced as follows:
Rm Interest Rate
Access facility 150 6.29% (1)
Term facilities 290 7.66% (2)
Development facility 200 6.73% (1)
640
(1) Based on 3 month JIBAR.
(2) Fully hedged including bank margins and debt raising fees.
The group’s debt repayment profile is set out below:
Financial year ending 31 March
Current/
Nature of Repayment future debt 2013 2014 2015 2016 2017 2018
debt date Rm Rm Rm Rm Rm Rm Rm
DMTN May
bonds 2015 – 2017 1 020 580 200 240
MICC – 14 August
bank debt 2014 450 450
Vukile – March
bank debt 2014/15 440 150* 150 140
RMB/SCM loans for
R1.48 billion April
acquisition 2015 – 2017 490 163 163 164
Total 2 400 150 150 590 743 363 404
% 100 6.25 6.25 24.6 31.0 15.1 16.8
* Access facility renewable each year.
97.7% of debt at 30 September 2012 has been hedged by way of fixed loans or interest rate swaps. Following the successful
launch of the DMTN programme and the bank refinance, the current all-in cost of finance, including margins and amortised debt
raising fees, has reduced from 9.36% (March 2012) to 8.60%.
6. Acquisitions and disposals
Acquisition of R1.48 billion quality office and retail portfolio
As referred to in previous SENS announcements, Vukile acquired twenty properties from Sanlam Life Insurance Limited with effect
from 25 April 2012. The price of R1.48 billion, was funded as follows:
Rm
Equity: 59.5 million units were issued at
R14.60 per linked unit 868.7
Bank debt 612.1
1 480.8
The issue price of R14.60 represented a 2.9% discount to the three-day volume weighted average price of the linked units as at
10 April 2012.
This portfolio is performing in line with original forecasts.
East Rand Mall 50% acquisition
As part of its on-going strategy to grow the portfolio, increase its retail exposure and improve the quality of its portfolio,
Vukile announced on SENS on 1 November 2012 the acquisition of a 50% undivided share of East Rand Mall from Redefine Properties
Limited for R1.115 billion. The 50% acquisition will be on the same terms and conditions and effected at the same time that
Redefine acquires the property from Sanlam Life Insurance Limited (“Sanlam”). The total purchase price payable by Redefine is
R2.23 billion.
The acquisition is subject to the receipt of Competition Commission approval.
East Rand Mall, one of the top regional malls in South Africa, has a GLA of 62 446m² and is situated in Boksburg, Gauteng. It
has an 85% comprehensive national tenant component which includes Edgars, Mr Price, Woolworths and Foschini. The strong
performing mall, supported by good trading densities among national tenants, has become the focal point of this eastern Gauteng
retail node with a catchment area of approximately 10km. The inclusion of the 50% undivided share of East Rand Mall will
enhance the quality of and strengthen the revenue of the Vukile portfolio.
The due diligence has been completed, legal agreements have been finalised and a detailed terms announcement was released on 23
November 2012.
Hammarsdale Junction Development
During May 2012, Vukile entered into a development agreement with the Eris Property Group for the xdevelopment of a 19 200m²
shopping centre in the Mpumalanga township of Hammarsdale, KwaZulu-Natal at a capital outlay of R194 million. Hammarsdale is
located midway between Pinetown and Pietermaritzburg. The centre will be anchored by Pick n Pay and Spar.
It is anticipated that the final national tenant component will be around 85%.
Hammarsdale Junction’s catchment area has about 42 000 households or a population of some 210 000 and the centre will breathe a
new life into the community by providing residents with their first large-scale, conveniently located, retail experience.
Opening is scheduled for June 2013. The expected yield in year one is 9.5%.
Linbro Park mini factory development
Vukile has in principle agreed with Stratford Property Ventures to purchase erven 11 and 12 Longlake extension 1 and the
development of a 15 000m² industrial mini unit complex at a total capital outlay of R119 million with a net initial yield of
10%.
This proposed development will be incorporated into Linbro Business Park, firmly established as a desirable business address
which enjoys excellent accessibility to the N3 and Sandton CBD via Marlboro Road, while offering the added benefit of being
located approximately three kilometres from the Gautrain Marlboro Station.
The proposed development on a site area of 28 698m² will comprise 22 units with a wide variety of unit sizes ranging from 350m²
to 1 870m².
The expected completion date of the development is 30 November 2013.
Acquisition of 50% undivided share in Pietermaritzburg Edendale shopping centre
An agreement has been reached to acquire a 50% interest in Edendale Mall, a 31 700m² development, at a capital outlay of R205
million with an initial yield of 8.3%.
Edendale Mall, a modern centre with enclosed malls, has good visibility, accessibility, adequate parking and taxi facilities.
The centre has a strong tenant mix comprising national, franchise and regional brands. The node is further strengthened by the
close proximity of the Edendale Provincial Hospital, SA police station, medical clinics and local schools.
It is estimated that the number of households by 2013 would number 90 000 or about 450 000 people in the catchment area.
The above transaction constitutes the effective commencement of a JV relationship with McCormick Property Development who
developed and will retain a 50% undivided share in the centre. The centre opened during October 2011 and the effective date of
the transaction is anticipated to be 1 May 2013.
Disposals
In line with the strategy of improving the quality of the portfolio, the following higher risk properties were disposed of in
the six months ending 30 September 2012:
Sales price Yield
Property R000 %
Nelspruit Prorom 38 000 12.5
VWL Pretoria 103 000 12.5
Glencairn Building and Truworths Building 67 648 7.8
John Griffin 16 500 12.0
Rundu Ellerines 2 800 14.7
227 948
The movement in group investment properties during the reporting period is summarised below:
Capitalised
Investment lease
properties commissions Total
R000 R000 R000
Balance 1 April 2012 6 113 070 14 283 6 127 353
Change in fair value of
investment properties 211 783 - 211 783
Tenant installation and
expansion and development costs 96 651 - 96 651
Portfolio acquisition
including transaction costs 1 487 281 - 1 487 281
Sale of properties (210 387) - (210 387)
Increase in capitalised
lease commissions - 2 432 2 432
Balance 30 September 2012 7 698 398 16 715 7 715 113
Allocated as follows:
R000
Non-current assets 7 288 260
Non-current assets held for sale 426 853
7 715 113
The following properties have been approved by the board for disposal as these properties are no longer considered core to the
portfolio:
Property GLA
Durban Embassy 32 367
Johannesburg Bassonia Office Park 1 597
Midtown Building 8 087
Midrand Allandale Park - land (1)
Katima Mulilo Pep Stores 2 472(2)
Johannesburg Eva Park 10 911
Sony Building 11 011(3)
Lichtenburg Shopping Centre 8 423
Randburg Triangle 3 047
Total 77 915
(1) Sales agreement signed.
(2) Transfer expected in November 2012.
(3) Property transferred on 18 October 2012.
The impact of sales of properties already effected as well as those anticipated to be concluded during the remainder of this
financial year, will be to reduce forecast net property revenue by some R6.6 million. This will be partially offset by interest
income earned on the sales proceeds.
A portion of the cash proceeds have been earmarked for reinvestment in the East Rand Mall acquisition as highlighted under
paragraph 10.
7. Property Portfolio
The combined property portfolio currently comprises 82 properties with a gross lettable area of 1 054 323m².
The sectoral spread by gross rentals comprises 53% Retail, 35% Offices, and 12% Industrial.
During the six month period under review, new leases and renewals with a total area of 136 685m² and a contract value of R480.5
million were concluded.
Bad debt write-offs have increased in line with expectations for the six month period due to the difficult trading conditions
being experienced. The provision for doubtful debts at 30 September 2012 is R11.7 million (R10.0 million at 31 March 2012),
which is considered adequate at this stage.
A summary of the movement in the impairment allowance of trade receivables is set out below:
R000
Impairment allowance 1 April 2012 10 028
Allowance for receivable impairment for the year 2 529
Receivables written off as uncollectable (829)
Impairment allowance 30 September 2012 11 728
Bad debt write-off and impairment allowance per the statement
of comprehensive income 4 492
The vacancy profile (measured as a percentage of gross rentals) indicates that the overall vacancy percentage has increased from
6.8% at 31 March 2012 to 7.3% at 30 September 2012.
The higher vacancies are due to the introduction of the portfolio of properties acquired from Sanlam during April 2012 which has
relatively higher vacancies. The portfolio acquired has shown some improvement since the transaction was effected as the
vacancy has reduced from 26 441m² (14.4%) to 24 841m² (13.5%). The two properties with the highest vacancy in the new portfolio
are Pretoria Sancardia (8 662m²) and Bloemfontein Bree Street Warehouse (6 563m²). At Sancardia we are finalising a lease
agreement with DPW for 5 200m² commencing on 1 March 2013 while at the Bloemfontein Warehouse we have received interest, but no
firm commitment yet.
Included in vacancies is 3 430m² (0.3%) of development vacancy at Randburg Square. We estimate that this will reduce to ±1
000m² (0.1%) on completion of Phase 2 of the upgrade which is due by end of June 2013. After completion, 16 new brands will be
added to the retail offering which include the Foschini and Truworths groups. Edgars and Woolworths, two of the anchor tenants,
and Mr Price, Clicks, Pep, Fashion World and Markham will be fully upgraded and expanded to cater for increased demand.
Shoppers will enjoy shopping in a new modernised centre with a dedicated food court, banking mall, a large variety of fashion,
furniture and homeware complemented by services such as the Post Office, Telkom, Postnet and cellphone stores.
The stable portfolio (excluding sales and acquisitions) shows slightly reduced vacancies on gross rentals since March 2012, from
6.8% to 6.6%.
Leasing activity picked up during the reported six months, and the vacancies in primarily the retail and industrial sectors
reduced significantly at selected properties as set out below:
Vacant area Vacant area
30 September 31 March
2012 2012 Difference
m² m² m²
Total 7 970 15 482 (7 512)
Retail 690 3 239 (2 549)
Sandton Bryanston Grosvenor
Shopping Centre 190 1 112 (922)
Durban Phoenix Plaza 160 1 029 (869)
Soweto Dobsonville Shopping Centre 340 1 098 (758)
Industrial 7 280 12 243 (4 963)
Cape Town Parow Industrial Park - 1 154 (1 154)
Midrand Allandale Industrial Park 3 571 4 605 (1 034)
Roodepoort Robertville Industrial Park 734 1 717 (983)
Randburg Trevallyn Industrial Park 2 975 3 677 (702)
Pinetown Westmead Kyalami Industrial
Park - 554 (554)
Centurion Samrand N1 - 536 (536)
However, increased vacancies at selected properties, as set out below, offset the positive reduction in vacancies achieved.
Vacant area Vacant area
30 September 31 March
2012 2012 Difference
m² m² m²
Total 11 607 4 102 7 505
Offices 9 683 4 102 5 581
Durban Embassy 7 795 3 437 4 358
Centurion 259 West Street 1 888 665 1 223
Industrial 1 924 - 1 924
Randburg Tungsten Industrial Park 1 924 - 1 924
The renewal escalations on expiry rentals are positive:
* Retail (up) 7.5%
* Offices (up) 9.2%
* Industrial (up) 8.0%
New leases concluded on retail space have exceeded budgeted rentals by 2%, while new leases concluded on offices and industrial
are down 3% and 2% respectively on budgeted rentals. Budgeted rentals equate to market related rentals. Overall, the portfolio
is on budget.
The contracted rental escalation profile reflects a positive average escalation across all sectors of 8.2%.
8. Valuations
The directors have valued the group’s property portfolio at R7.7 billion utilising the discounted cash flow methodology. In
terms of the group’s accounting policies, approximately 50% of all properties are valued every six months on a rotational basis
by qualified independent external valuers. The external valuation by Jones Lang LaSalle (Pty) Ltd, Broll Valuation and Advisory
Services and Old Mutual Investment Group South Africa (Pty) Ltd of 51.4% of the total portfolio is in line with the directors’
valuation. On a normalised basis the value of the group’s property portfolio increased by 8.7% from the 30 September 2011
valuation.
9. Operating segment reporting
The revenues and profit generated by the group’s operating segments and segment assets are summarised in the table below.
During the six month period to 30 September 2012, there has been no change from prior periods in the measurement methods used to
determine operating segments and reported segment profits.
OPERATING SEGMENT ANALYSIS
Asset
manage-
Indus- ment
trial Offices Retail Total business Total
R000 R000 R000 R000 R000 R000
September 2012
Group income for the
six months ended
30 September 2012
Property revenue 69 047 207 671 297 421 574 139 59 682 633 821
Property expenses (24 365) (78 894) (124 840) (228 099) (14 387) (242 486)
44 682 128 777 172 581 346 040 45 295 391 335
Straight-line rental income
accrual (913) (2 747) (3 934) (7 594) (7 594)
Profit from property
and other operations 43 769 126 030 168 647 338 446 45 295 383 741
Group statement of
financial position at
30 September 2012
Assets
Investment properties 1 047 599 2 623 649 3 600 297 7 271 545 7 271 545
Add: Lease commissions 16 715 16 715
1 047 599 2 623 649 3 600 297 7 288 260 7 288 260
Goodwill 3 917 931 60 696 65 544 65 544
Intangible asset 237 053 237 053
Investment properties
held for sale 74 700 289 205 62 948 426 853 426 853
1 126 216 2 913 785 3 723 941 7 780 657 237 053 8 017 710
Add: Excluded items
Deferred capital expenditure 545
Furniture, fittings and
computer equipment 1 862
Available-for-sale
financial asset 44 645
Financial asset at
amortised cost 2 060
Trade and other receivables 59 958
Cash and cash equivalents 315 910
Total assets 8 442 690
Liabilities
Linked debentures
and premium 430 476 1 117 271 1 405 097 2 952 844 2 952 844
Interest bearing borrowings 326 264 846 796 1 064 944 2 238 004 2 238 004
756 740 1 964 067 2 470 041 5 190 848 5 190 848
Add: Excluded items
Equity attributable to
owners of parent 2 231 477
Derivative financial
instrument 81 978
Deferred taxation liabilities 473 376
Trade and other payables 217 170
Current taxation liabilities 13 706
Linked unitholders for
distribution 234 135
Total equity and liabilities 8 442 690
September 2011
Group income for the
six months ended
30 September 2011
Property revenue 65 161 127 001 250 505 442 667 22 973 465 640
Property expenses (19 818) (47 171) (99 469) (166 458) (13 872) (180 330)
45 343 79 830 151 036 276 209 9 101 285 310
Straight-line rental
income accrual 10 042 17 681 33 451 61 174 61 174
Profit from property
and other operations 55 385 97 511 184 487 337 383 9 101 346 484
Group statement of financial
position at 30 September
2011
Assets
Investment properties 937 559 1 522 695 3 054 173 5 514 427 5 514 427
Add: Lease commissions 13 270 13 270
937 559 1 522 695 3 054 173 5 527 697 5 527 697
Goodwill 3 889 5 091 61 365 70 345 70 345
Intangible asset 312 832 312 832
Investment properties held
for sale 29 282 210 301 115 623 355 206 355 206
970 730 1 738 087 3 231 161 5 953 248 312 832 6 266 080
Add: Excluded items
Furniture, fittings and
computer equipment 1 658
Available-for-sale financial
asset 20 092
Financial asset at amortised
cost 4 782
Trade and other receivables 64 377
Cash and cash equivalents 188 251
Total assets 6 545 240
Liabilities
Linked debentures and
premium 359 604 584 035 1 171 437 2 115 076 2 115 076
Interest bearing borrowings 285 121 463 066 928 803 1 676 990 1 676 990
644 725 1 047 101 2 100 240 3 792 066 3 792 066
Add: Excluded items
Equity attributable to
owners of parent 2 045 777
Derivative financial
instrument 36 929
Deferred taxation
liabilities 306 637
Trade and other payables 172 709
Current taxation
liabilities 471
Linked unitholders
for distribution 190 651
Total equity and
liabilities 6 545 240
10. Financial effects of the strategic acquisition of a 50% undivided share
in East Rand Mall and withdrawal of cautionary announcement
10.1 Introduction
Vukile linked unitholders (“unitholders”) are referred to the company’s announcement published on SENS on 1 November 2012
(“announcement”). In terms of the announcement, unitholders were advised that Vukile has entered into formal legal agreements
with Redefine Properties Limited (“Redefine”) to acquire a 50% undivided share in the East Rand Mall (“Property”) from Redefine
for a cash consideration of R1.115 billion (the “Acquisition”), on the same terms and conditions and at the same time that
Redefine acquires the Property from Sanlam Life Insurance Limited. A detailed terms announcement was released on 23 November
2012 and sets out additional information on this Acquisition. The Acquisition remains subject to Competition Commission
approval.
10.2 Pro-forma forecast information
The pro-forma forecast financial information relating to the Acquisition, based on an effective date of 1 April 2013, for the 12
months ending 31 March 2014 and the year ending 31 March 2015, is set out below. As a category 2 transaction the forecast
financial information set out in paragraphs 10.1.2 and 10.2.2 below is the responsibility of the directors and is not required
to be reviewed and reported on by the reporting accountant in terms of Section 8 of the JSE Listing Requirements.
10.2.1 On the basis of the above, the pro-forma forecast financial effects of the Acquisition are as follows:
Year ending Year ending
31 March 31 March
2014 2015
R000 R000
Forecast property revenue (1) (2) 114 692(3) 118 307(4)
Property expenditure (34 861) (37 290)
Operational net income 79 831 81 017
Finance costs (49 586)(5) (49 586)
Net profit before capital items 30 245 31 431
Net profit after tax 56 762 93 841
Earnings available for distribution 25 140 30 172
Forecast yields (6) 6.72% 7.18%
(1) Contracted rental income for the 12 months to 31 March 2014 is 74.4% of the total forecast revenue and for the 12 months to
31 March 2015 is 58.9% based on existing signed lease agreements.
(2) Uncontracted rental income for the 12 months to 31 March 2014 is 25.6% and for the 12 months to 31 March 2015 is 41.1% of
the total forecast gross rental.
Leases expiring during the periods have been forecast on a lease-by-lease basis, with particular regard as to the likelihood of
existing tenants renewing their leases.
(3) Includes straight-line rental accruals of R5.1 million.
(4) Includes straight-line rental accruals of R1.26 million.
(5) Finance costs are forecast at an effective rate of 7.18% per annum, based on the following debt:
* R75 million 6 month commercial paper;
* R75 million 12 month commercial paper;
* R193.6 million 3 year bank debt/DMTN bonds; and
* R193.6 million 5 year bank debt/DMTN bonds.
Interest foregone on the R225 million surplus cash at 4.9% per annum amounting to R11.02 million has been incorporated into
finance costs as an opportunity cost.
(6) Calculated on operational net income, excluding straight-line rental accruals, for the 12 months to 31 March 2014 and to 31
March 2015, based on a total adjusted purchase consideration at 1 April 2013 of R1.1115 billion, inclusive of transaction costs.
10.2.2. Pro-forma financial information
The following table sets out the unaudited pro-forma financial effects of the Acquisition on net asset value (“NAV”) and
tangible net asset value (“TNAV”) per linked unit based on the unaudited, published results of the company for the six months
ended 30 September 2012. The unaudited pro-forma financial effects are the responsibility of the directors and have been
prepared for illustrative purposes only to provide information relating to how the Acquisition may have impacted unitholders on
the relevant reporting date and, due to their nature, may not fairly present Vukile’s financial position, changes in equity,
results of operations or cash flows after implementation of the Acquisition.
Unaudited Pro-forma (Decrease)/
30 September after the Increase
2012 Acquisition acquisition %
NAV per linked unit (cents) 1 263 (5) 1 258 (0.4)
TNAV per linked unit (cents) 1 189 (2) 1 187 (0.2)
Linked units in issue 410 515 218 20 525 000 431 040 218 5.0
Assumptions:
The pro-forma financial effects have been calculated on the basis of the following assumptions:
* Assets increased by R1 004 million, being the director’s valuation of 50% of East Rand Mall, inclusive of transaction costs.
* 20.525 million linked units are issued for cash at R17.02, representing a 2.5% discount to the share price prevailing at 1
November 2012, the date of issue of the cautionary announcement referred to in paragraph 10.1.
* Short and long-term bank finance is increased by R537.2 million to partly fund the Acquisition.
* Existing cash resources arising from the disposals of properties of R225 million is utilised to partly fund the acquisition.
* TNAV has been calculated by deducting goodwill and intangible assets of R65.5 million and R237.1 million respectively from
NAV.
Merchant bank and transaction sponsor: RAND MERCHANT BANK (A division of First Rand Bank Limited)
11. Withdrawal of cautionary announcement
Unitholders are advised that as the financial effects of the Acquisition have now been disclosed, caution is no longer required
to be exercised when dealing in Vukile linked units.
Merchant bank and transaction sponsor: RAND MERCHANT BANK (a division of First Rand Bank Limited)
12. Treatment of abnormal sales comissions earned
The sale of East Rand Mall by Sanlam will generate significant sales commission for Vukile, in the order of R67 million. This
is over and above the sales commission of R44.5 million generated on the sale of the R1.48 billion portfolio in April 2012,
which income will be apportioned over the two distribution periods to 31 March 2013. The timing of the R67 million sales
commission is dependent on the receipt of notice that the Competition Commission application has been successful and it is
uncertain at this stage whether transfer will be effected in the March 2013 or March 2014 financial years. Once the company has
more certainty on the date of transfer an advisory announcement will be issued on SENS.
In order to try and generate a more predictable and stable income stream for investors going forward, the company has decided to
distribute abnormal sales commission in the financial year in which it is received.
This sales commission will be paid as a special distribution and clearly distinguished from the normalised distribution
generated by the group. As such, the company believes that the uncertainty surrounding its earnings base will be eliminated and
provide the investment community with greater predictability of future earnings.
In essence, as from the 2014 financial year, the reported distribution will be in respect of a normalised distribution and any
abnormal sales commission reported over and above that will be distributed as a special distribution.
13. Retirement of Mr HSC Bester as non-executive director
During the period under review Mr HSC Bester retired from the board of directors after serving as director, member of the
property and investment committee and chairman of the audit and risk committee since the listing of Vukile in 2004. The company
thanks Mr Bester for his dedication and his wisdom and wishes him well in his future endeavours.
14. Prospects
Notwithstanding that the local and international economic environment remains subdued, the portfolio has performed well over the
past six months and we would expect similar performance to ensue in the second half of the financial year.
We will continue to focus on not only growing the portfolio in line with our stated strategy but also on opportunities to
improve the quality of the portfolio and establishing a dominant retail bias to the portfolio mix. The aforementioned East Rand
Mall acquisition certainly delivers substantially in both respects. As part of this process, we will continue looking to sell
non-core properties which may come at a yield dilution but certainly reduces the risk in the portfolio.
We expect the full year distribution to increase by between 4-6% as compared to the previous year, excluding the receipt of R67
million sales commission in respect of East Rand Mall should it fall in this financial year.
The above forecast has not been audited or reviewed by Vukile’s auditors.
15. Payment of debenture interest and dividend
Notice is hereby given of a distribution amount to 57.03 cents per linked unit, for the six-month period to 30 September 2012.
The distribution comprises interest on debentures of 56.914 cents per linked unit and a dividend of 0.116 cents per linked unit.
* the cash dividend has been declared out of income reserves and no secondary tax on companies’ credit has been declared;
* the local dividend tax rate is 15%;
* the gross local dividend amount for the ordinary cash dividend is 0.116 cents per linked unit for shareholders exempt from
paying the new Dividends Tax;
* the net local dividend amount for the ordinary cash dividend is 0.0986 cents per linked unit for shareholders liable to pay the
new Dividends Tax;
* the issued share capital of Vukile is 410 515 218 linked units of one cent each; and
* Vukile’s tax reference number is 9331/617/14/3.
Last date to trade cum distribution Friday, 7 December 2012
Linked units trade ex-distribution Monday, 10 December 2012
Record date for unitholders to
participate in the distribution Friday, 14 December 2012
Payment of distribution Tuesday, 18 December 2012
Linked unit certificates may not be dematerialised or re-materialised between Friday, 7 December 2012 and Friday, 14 December
2012, both days inclusive.
On behalf of the board
AD Botha LG Rapp Roodepoort
Chairman Chief executive 23 November 2012
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 30 September 2012
Unaudited Unaudited Audited
30 September 30 September 31 March
2012 2011 2012
R000 R000 R000
ASSETS
Non-current assets 7 639 969 5 937 406 6 176 629
Investment properties 7 153 484 5 412 925 5 674 979
Investment properties 7 288 260 5 527 697 5 806 158
Straight-line rental income
adjustment (134 776) (114 772) (131 179)
Other non-current assets 486 485 524 481 501 650
Intangible asset 237 053 312 832 267 096
Straight-line rental income asset 134 776 114 772 131 179
Deferred capital expenditure 545 - 4 411
Furniture, fittings and computer
equipment 1 862 1 658 1 985
Available-for-sale financial asset 44 645 20 092 28 468
Financial asset at amortised cost 2 060 4 782 2 967
Goodwill 65 544 70 345 65 544
Current assets 375 868 252 628 266 881
Trade and other receivables 59 958 64 377 50 934
Cash and cash equivalents 315 910 188 251 215 947
Investment properties held for
sale 426 853 355 206 321 195
Total assets 8 442 690 6 545 240 6 764 705
EQUITY AND LIABILITIES
Equity and reserves 2 231 477 2 045 777 2 074 470
Non-current liabilities 5 596 202 4 135 632 3 022 150
Linked debentures and premium 2 952 844 2 115 076 2 113 213
Other interest bearing
borrowings 2 088 004 1 676 990 448 790
Derivative financial instruments 81 978 36 929 25 644
Deferred taxation liabilities 473 376 306 637 434 503
Current liabilities 615 011 363 831 1 668 085
Trade and other payables 217 170 172 709 188 692
Short-term borrowings 150 000 - 1 230 640
Current taxation liabilities 13 706 471 1 267
Linked unitholders for
distribution 234 135 190 651 247 486
Total equity and liabilities 8 442 690 6 545 240 6 764 705
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 September 2012
Unaudited Unaudited Audited
30 September 30 September 31 March
2012 2011 2012
R000 R000 R000
Property revenue 574 139 442 667 933 269
Straight-line rental income
accrual (7 594) 61 174 45 993
Gross property revenue 566 545 503 841 979 262
Property expenses (228 099) (166 458) (334 421)
Net profit from property
operations 338 446 337 383 644 841
Profit from asset management
business 45 295 9 101 22 525
Corporate administrative expenses (14 510) (10 667) (25 919)
Investment and other income 8 096 7 771 13 557
Operating profit before
finance costs 377 327 343 588 655 004
Finance costs (100 356) (82 721) (165 633)
Profit before debenture interest 276 971 260 867 489 371
Debenture interest (233 639) (190 263) (437 224)
Profit before capital items 43 332 70 604 52 147
Profit on sale of investment
properties 5 405 - 3 084
Profit on sale of subsidiary 555 - 1 428
Amortisation of debenture premium 4 677 1 839 3 703
Impairment of goodwill - - (4 801)
Goodwill written-off on sale of
properties by subsidiary - (762) (762)
Impairment of intangible asset (30 043) - (45 736)
Profit before fair value
adjustments 23 926 71 681 9 063
Fair value adjustments 219 377 356 427 549 253
Gross change in fair value of
investment properties 211 783 417 601 595 246
Straight-line rental income
adjustment 7 594 (61 174) (45 993)
Profit before taxation 243 303 428 108 558 316
Taxation (57 323) (57 169) (187 987)
Profit for the period after
taxation 185 980 370 939 370 329
Other comprehensive loss
Cash flow hedges (56 334) (15 029) (4 412)
Available-for-sale financial
assets 6 862 (6 122) 3 453
Other comprehensive loss for
the period (49 472) (21 151) (959)
Total comprehensive income for
the period 136 508 349 788 369 370
Earnings per linked unit (cents) 103.20 159.88 230.06
Diluted earnings per linked
unit (cents) 103.20 159.88 230.06
Number of linked units in
issue 410 515 218 351 015 218 351 015 218
Weighted average number of
linked units in issue 406 602 889 351 015 218 351 015 218
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 30 September 2012
Unaudited Unaudited Audited
30 September 30 September 31 March
2012 2011 2012
R000 R000 R000
Cash flow from operating
activities 398 546 278 998 638 685
Cash flow from investing
activities (1 368 322) (111 340) (167 450)
Cash flow from financing
activities 1 069 739 (317 216) (593 097)
Net increase/(decrease) in
cash and cash equivalents 99 963 (149 558) (121 862)
Cash and cash equivalents at
the beginning of the period 215 947 337 809 337 809
Cash and cash equivalents at
the end of the period 315 910 188 251 215 947
RECONCILIATION OF GROUP NET PROFIT TO HEADLINE EARNINGS AND TO PROFIT
AVAILABLE FOR DISTRIBUTION
Unaudited Unaudited Audited
30 September 30 September 31 March
2012 2011 2012
R000 R000 R000
Attributable profit after
taxation 185 980 370 939 370 329
Adjusted for:
Debenture interest 233 639 190 263 437 224
Earnings per linked unit 419 619 561 202 807 553
Change in fair value of
investment properties (219 377) (356 427) (549 253)
Total tax effects of adjustments 42 897 42 441 175 725
Profit on sale of subsidiary (555) - (1 428)
Write-off of goodwill on sale
of subsidiary - 762 762
Profit on sale of investment
properties (5 405) - (3 084)
Impairment of goodwill - - 4 801
Impairment of intangible asset 30 043 - 45 736
Amortisation of debenture
premium (4 677) (1 839) (3 703)
Headline earnings of linked
units 262 545 246 139 477 109
Straight-line rental accrual
net of deferred taxation 5 989 (53 128) (38 009)
Profit available for
distribution 268 534 193 011 439 100
Headline earnings per linked
unit (cents) 64.58 70.13 135.93
Diluted headline earnings per
linked unit (cents) 64.58 70.13 135.93
Available for distribution per
linked unit (cents) 66.05 55.00 125.10
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 September 2012
Revalua-
tion of
Share Non- available-
capital distri- for-sale
and share butable financial Cash flow Retained
premium reserves assets hedges earnings Total
R000 R000 R000 R000 R000 R000
Restated balance at
31 March 2011 32 263 1 681 565 (19 830) (22 228) 24 295 1 696 065
Balance at 31 March 2011
as previously reported 32 263 1 390 050 (19 830) (22 228) 24 295 1 404 550
Prior year adjustment
Change of rate in deferred
taxation including straight-
line rental accrual - 291 515 - - - 291 515
Dividend distribution - - - - (388) (388)
32 263 1 681 565 (19 830) (22 228) 23 907 1 695 677
Profit for the period - - - - 370 939 370 939
Change in fair value of
investment properties - 417 601 - - (417 601) -
Deferred taxation on change in
fair value of investment
properties and straight-line
rental accrual - (50 487) - - 50 487 -
Share-based remuneration - 4 528 - - - 4 528
Disposal of Namibian subsidiary - (4 216) - - - (4 216)
Transfer from non-distributable
reserve - (762) - - 762 -
Other comprehensive income
Revaluation of available-for-sale
financial asset - - (6 122) - - (6 122)
Revaluation of cash flow hedges - - - (15 029) - (15 029)
Restated balance at
30 September 2011 32 263 2 048 229 (25 952) (37 257) 28 494 2 045 777
Balance at 30 September 2011
as previously reported 32 263 1 703 778 (25 952) (37 257) 28 494 1 701 326
Prior year adjustment
Change of rate in deferred
taxation including straight-
line rental accrual - 344 451 - - - 344 451
Dividend distribution - - - - (504) (504)
32 263 2 048 229 (25 952) (37 257) 27 990 2 045 273
Loss for the period - - - - (610) (610)
Change in fair value of
investment properties - 177 645 - - (177 645) -
Deferred taxation on change in
fair value of investment
properties and straight-line
rental accrual - (133 846) - - 133 846 -
Share-based remuneration - 5 399 - - - 5 399
Disposal of Namibian subsidiary - 4 216 - - - 4 216
Transfer from non-distributable
reserve - (45 401) - - 45 401 -
Other comprehensive income
Revaluation of available-for-
sale financial asset - - 9 575 - - 9 575
Revaluation of cash flow hedges - - - 10 617 - 10 617
Restated balance at
31 March 2012 32 263 2 056 242 (16 377) (26 640) 28 982 2 074 470
Restated balance at
31 March 2012
as previously reported 32 263 1 762 960 (16 377) (26 640) 28 982 1 781 188
Prior year adjustment
Change of rate in deferred
taxation including straight-
line rental accrual - 293 282 - - - 293 282
Issue of share capital and
premium 17 231 - - - - 17 231
Dividend distribution - - - - (477) (477)
49 494 2 056 242 (16 377) (26 640) 28 505 2 091 224
Profit for the period - - - - 185 980 185 980
Change in fair value of
investment properties - 211 783 - - (211 783) -
Deferred taxation on change
in fair value of investment
properties and straight-line
rental accrual - (35 254) - - 35 254 -
Share-based remuneration - 3 745 - - - 3 745
Transfer from non-distributable
reserve - (30 121) - - 30 121 -
Other comprehensive income
Revaluation of available-for-sale
financial asset - - 6 862 - - 6 862
Revaluation of cash flow hedges - - - (56 334) - (56 334)
Balance at 30 September 2012 49 494 2 206 395 (9 515) (82 974) 68 077 2 231 477
JSE sponsor: Java Capital, Rosebank, Johannesburg.
NSX sponsor: IJG Group, Windhoek, Namibia.
Transaction sponsor for East Rand Mall 50% acquisition: Rand Merchant Bank, Sandton
Executive directors: LG Rapp (Chief executive), MJ Potts (Financial director), HC Lopion (Executive director: asset management).
Non-executive directors: AD Botha (Chairman), SF Booysen, PJ Cook, JM Hlongwane, PS Moyanga, NG Payne, HM Serebro.
Registered office: Ground floor Meersig Building, Constantia Boulevard, Constantia Kloof, 1709.
Company Secretary: J Neethling.
Transfer secretaries: Link Market Services South
Africa (Pty) Ltd, Braamfontein, Johannesburg.
Investor and media relations: Contact Helen McKane on vukile@dpapr.com, or Tel: 011 728-4701.
www.vukile.co.za
Date: 23/11/2012 05:16:00 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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