Wrap Text
Summarised audited results for the year ended 31 March 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)
SUMMARISED AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2017
Highlights
- Successful transformation into a focused Retail REIT
- 7.1% growth in annual dividends
- Well positioned for further international expansions
- Continued strong retail trading metrics
- Strong balance sheet with a gearing ratio of 23%
- Corporate rating of “A” with a positive outlook and “AA+” on senior secured bonds
Commentary
1. NATURE OF OPERATIONS
The group is a long-term investor in a retail-focused property portfolio with strong contractual cash flows
for sustainability and capital appreciation.
2. SIGNIFICANT EVENTS AND TRANSACTIONS
During this reporting period, the following significant transactions were effected which resulted in Vukile
transforming into a retail REIT as follows:
1. The sale of the sovereign portfolio for R1.18 billion at 31 August 2016.
2. The purchase of Synergy Income Fund Limited (Synergy) R2.5 billion retail portfolio in exchange for
the bulk of Vukile’s office and industrial portfolio for a similar value.
3. Acquisition of remaining 50% of Pinecrest Shopping Centre for R407 million.
4. The acquisition of a 25% undivided share in Springs Mall for R260 million. The mall opened in March 2017.
5. The completion of a R230 million (50%) revamp and extension of East Rand Mall.
6. The €13 million acquisition of 86.89% of Castellana Properties SOCIMI SA (Castellana), a Spanish REIT.
7. A further £10.7 million investment in Atlantic Leaf Properties Limited (Atlantic Leaf), increasing
Vukile’s shareholding to 29.6%.
3. SUMMARY OF FINANCIAL PERFORMANCE
The directors of Vukile are pleased to report that the dividend for the six months ended 31 March 2017 has
increased by 7.2% to 89.1025 cents per share, despite a yield drag following the sale of the sovereign portfolio
at 31 August 2016 at a 12% yield. The proceeds of the sale were utilised to repay debt (R678 million) and
invested in the money market (R503 million) at lower yields, while management has been evaluating opportunities
to deploy the proceeds internationally. The dividends for the full year rose by 7.1% to 156.75 cents per share.
The group’s net profit after tax for the year ended 31 March 2017 amounted to R1.5 billion (March 2016: R1.6 billion).
The current results reflect a loss of control of Synergy of R277 million, which amount does not affect
distributable earnings.
The group’s net profit available for distribution amounted to R1.12 billion for the year ended 31 March 2017,
which represents an increase of 12.2% over the comparable period – refer to note 1 to the Annual Financial Statements.
The proposed total dividend is made up as follows:
Cents
Rm % per share
- First 467.2 42.8 67.65
- Second(1) 625.4 57.2 89.10
Total 1 092.6 100.0 156.75
(1) Based on shares in issue at 31 March 2017.
An additional distribution of R19.7 million was paid in June 2016 following a R400 million share issuance
in April 2016. The shareholders who participated in the issuance were entitled to receive the March 2016
second half distribution.
Dividend per share is the key measure to be used for trading statement purposes.
2017 2016 %
Key financial measures March March change
Dividends per share (cents) 156.75 146.35 7.1
Earnings (Rm) 1 499 1 586 (5.5)
Net asset value per share (cents) 1 868 1 842 1.4
Loan to value ratio (%)(I) 29.2 31.9 8.6
Loan to value ratio net of cash (%)(II) 22.6 26.9 16.0
Gearing ratio (%)(III) 23.0 29.5 22.0
(I) Based on directors’ valuations of the group’s portfolio at 31 March 2017.
(II) Based on (I) above less cash net of cash held on deposit from tenants.
(III) The gearing ratio is calculated by dividing total interest-bearing borrowings by total assets.
4. GROUP PROPERTY PORTFOLIO OVERVIEW(1)
The Southern African property portfolio at 31 March 2017 consisted of 67 properties with a total market value of
R13.1 billion (excluding the 20% non-controlling interest in Moruleng Mall) and gross lettable area of 936 459m²,
with an average value of R196 million per property.
The geographical and sectoral distribution of the group’s portfolio is indicated in the tables below. The portfolio
is well-represented in most of the South African provinces and Namibia. Some 75% of the gross income is derived
from Gauteng, KwaZulu-Natal, Namibia and Western Cape.
Geographic profile
Total
portfolio
% of gross income %
Gauteng 37
KwaZulu-Natal 21
Namibia 9
Western Cape 8
North West 6
Free State 6
Limpopo 5
Mpumalanga 5
Eastern Cape 3
Based on market value, 91% of the group portfolio is in the retail sector, followed by 4% in the office, 3% in
the industrial, 1% in the motor-related sector and 1% in the residential sector.
The tenant profile is listed in the table below:
Tenant profile
Total
portfolio Retail
% of GLA % %
Large national and listed tenants and major franchises 65 72
National and listed tenants, franchised and medium
to large professional firms 11 9
Other 24 19
The retail portfolio’s exposure to national, listed and franchised tenants is 81% in total.
Vukile has low tenant concentration risk with the top 10 tenants accounting for 40.4% of total rent and 31.0%
of total GLA. Based on rent the Steinhoff group is the single largest tenant, with 7.2% of total rent
(6.2% of total GLA), with Shoprite the second largest at 5.6% of total rent (8.6% of total GLA).
The top 10 properties, all of which are retail assets, have 89.2% exposure to national, listed and franchised
tenants and represent 44.4% of the total portfolio market value and 30.7% of the total portfolio GLA.
(1) All of the above information excludes the two properties owned by Castellana. Information on these two
properties is set out in paragraph 3(v).
Top 10 properties by value
Directors’
valuation
Rentable at 31 March
area 2017 % Valuation
Property Location m² Rm of total R/m²
Boksburg East Rand Mall* Gauteng 34 712 1 277 9.8 36 794
Durban Phoenix Plaza KwaZulu-Natal 24 351 791 6.0 32 500
Pinetown Pine Crest KwaZulu-Natal 40 087 786 6.0 19 603
Soweto Dobsonville Mall Gauteng 23 236 513 3.9 22 060
Gugulethu Square Western Cape 25 322 480 3.7 18 944
Queenstown Nonesi Mall Eastern Cape 28 147 421 3.2 14 940
Moruleng Mall# North West 25 137 394 3.0 15 658
Oshakati Shopping Centre Namibia 24 632 390 3.0 15 834
Phuthaditjhaba Setsing Crescent Free State 21 538 385 2.9 17 860
Randburg Square Gauteng 40 767 380 2.9 9 331
Total 287 929 5 817 44.4 20 204
* Represents an undivided 50% share in this property.
# Represents an 80% share in the company.
5. VALUATION OF PORTFOLIO
The accounting policies of the group require that the directors value the entire portfolio every six months at
fair market value. Approximately one-half of the portfolio is valued every six months, on a rotational basis,
by registered independent third-party valuers. The directors have valued the group’s property portfolio at
R13.1 billion(1) as at 31 March 2017. This is R2.5 billion or 16.0% lower than the valuation as at 31 March 2016
due to the Gemgrow transaction and the sale of the sovereign portfolio. The market value of the stable portfolio
increased by 7.3%. The calculated recurring forward yield for the portfolio is 8.6%.
During the year all properties were valued by external valuers and the valuations by Quadrant Properties (Pty) Ltd
and Knight Frank (Pty) Ltd are in line with the directors’ valuations.
(1) The Southern African property portfolio overview takes into account Moruleng Mall at 80%, whereas in the
financial statements the group property value reflects 100% of Clidet No 1011, which owns Moruleng Mall,
and also excludes the two properties held in Castellana.
6. PROPERTY PORTFOLIO PERFORMANCE
Financial performance for the stable portfolio (excluding recent acquisitions and sales)
March March
2017 2016 %
Rm Rm change
Property revenue 1 087.4 1 012.9 7.4
Recurring net property expenses (181.5) (188.4) 3.7
Net property income 905.9 824.5 9.9
Property net expense ratios (%) 16.7 18.6 10.3
New leases and renewals in excess of 180 000m² with a contract value of R1.27 billion were concluded
during the year to date. Some 80% of leases to be renewed during the 12 months ended 31 March 2017
were renewed or are in the process of being renewed.
Details of large contracts concluded:
Contract Lease
value duration
Tenant Property Rm years
Game Stores Pinetown Pine Crest 60.9 9
OK Bazaars Randburg Square 56.3 10
Spar Elim Hubyeni Shopping Centre 53.8 10
Spar Hartbeespoort Sediba Shopping Centre 42.2 10
World Food Programme South Africa Sandton Sunninghill Sunhill Park 27.1 5
Barloworld South Africa Cape Town Bellville Barons 24.8 10
ADT Security Midrand Ulwazi Building 20.6 10
Spar Makhado Nzhelele Valley Shopping Centre 20.0 9
Dis-Chem Germiston Meadowdale Mall 16.1 10
Jet Stores Durban Phoenix Plaza 14.1 5
The group lease expiry profile table reflects that 22% of the leases are due for renewal in the
2018 financial year. Approximately 39% of leases are due to expire in 2021 and beyond (up from
33% beyond 2020 in the prior year).
Beyond
March March March March March
Vacant 2018 2019 2020 2021 2021
Group lease expiry % of GLA % % % % % %
GLA 22 21 14 8 31
Cumulative as at March 2017 4.3 26 47 61 69 100
Cumulative as at March 2016 3.9 47 67 78 85 100
Vacancies
At 31 March 2017 the portfolio’s vacancy (measured as a percentage of gross lettable area) was 4.3% compared
to 3.9% at 31 March 2016. The retail portfolio vacancies based on GLA increased from 3.5% to 3.8%.
The vacancy per sector (measured as a percentage of gross lettable area) is indicated in the table below:
31 March
31 March 2017
2017 including
31 March development development 31 March
2017 vacancy vacancy 2016
Vacancies (% of GLA) % % % %
Retail 3.8 0.6 4.4 3.5
Offices 8.4 - 8.4 5.0
Industrial 7.2 - 7.2 4.3
Motor related - 23.9 23.9 -
Sovereign 4.2
Hospital -
Total 4.3 0.7 5.0 3.9
At 31 March 2017, the portfolio’s vacancy (measured as a percentage of gross rental) decreased
to 4.2% compared to 5.0% at 31 March 2016.
31 March
31 March 2017
2017 including
31 March development development 31 March
2017 vacancy vacancy 2016
Vacancies (% of gross rental) % % % %
Retail 3.6 0.5 4.1 4.0
Offices 12.6 - 12.6 9.6
Industrial 7.2 - 7.2 5.8
Motor related - 9.7 9.7 -
Sovereign 3.6
Total 4.2 0.6 4.8 5.0
GLA summary GLA m²
Balance at 1 April 2016 1 427 591
GLA adjustments (147)
Disposals (513 156)
Acquisitions and extensions 22 171
Balance at 31 March 2017 936 459
Vacancy summary Area m² %
Balance at 31 March 2016 55 139 3.9
Less: Properties sold since 31 March 2016 (23 681) (4.6)
Remaining portfolio balance at 31 March 2016 31 458 3.4
Leases expired or terminated early 206 242
Renewal of expired leases (112 103)
Contracts to be renewed (26 789)
Tenants vacated (66 308)
Development vacancy (7 034)
New letting of vacant space 14 701
Balance at 31 March 2017 40 167 4.3
Base rentals (excluding recoveries)
The weighted average monthly base rental rates per sector, between 31 March 2016 and 31 March 2017,
are set out in the table below:
Weighted average base rentals March March Escalations
(R/m²) excluding recoveries 2017 2016 %
Retail 122.88 114.61 7.2
Offices 90.25 94.56 (4.6)
Industrial 51.96 44.65 16.4
Motor related 135.46 121.91 11.1
Sovereign 101.50
Hospital 106.55
Total 115.42 96.71 19.3
The increased average rental rates on the total portfolio is due to the focused retail exposure.
The average contractual rental escalation of 7.4% is slightly lower than the previous year (7.6%).
The average escalation on expiry rentals on the total portfolio of 6.7% is positive against the backdrop of a
difficult trading environment. Positive reversions were achieved across all sectors with retail at 6.9%, offices
at 5.0% and industrial at 4.1%.
Expense categories and ratios
The top four expense categories contribute 82% of the total expenses. These are: government services (46%), rates
and taxes (17%), cleaning and security (11%) and property management fees (8%).
The group continuously evaluates methods of containing costs in the portfolio. The stable portfolio’s recurring net
costs-to-income ratios have improved from 18.6% in March 2016 to 16.7% in March 2017.
7. DEVELOPMENTS, ACQUISITIONS AND SALES
Upgrades/redevelopments - R873 million
As part of the ongoing strategy to improve the quality of the existing portfolio, the following projects have been
completed or are in progress.
East Rand Mall
East Rand Mall (in which the company owns a 50% undivided share with Redefine Properties Limited) has been upgraded
and extended at a total cost of R460 million, of which Vukile’s share is R230 million. The project was completed by
January 2017 and the projected yield on the total capex is 5.3%.
East Rand Mall, regarded as one of the top regional malls in South Africa, had a GLA of 63 460m², which was increased
to c.70 000m². The main entrances, malls, some shop fronts, ceilings and toilets have been upgraded, while some areas
have been reconfigured to allow better utilisation of the available space. New generators and a new PV cell solar
installation have been installed to provide full backup power to the centre during power outages.
The extension of 6 540m² incorporates a relocated entrance four and a youth-oriented mall anchored by a Mr Price
emporium, consisting of its apparel, sport and home outlets comprising about 3 700m² and Cotton-On (1 250m²).
International retailer H&M (2 485m²) started trading in a reconfigured existing section of the centre in December 2016.
Together with the adjacent East Point (previously East Rand Galleria), which has also been upgraded, shoppers can
now experience a dominant super-regional shopping centre with a GLA of about 120 000m².
Durban: The Workshop
The upgrade of R75 million to The Workshop in Durban was completed in February 2017.
The project included the upgrade of the various ablution facilities, the reconfiguration and upgrade of the food
court, the replacement of all the shop fronts and mall tiles, the installation of new ceilings in selected areas,
installing energy efficient lighting in the mall areas and an increase of natural light, the installation of a new
glass-enclosed passenger lift, painting of the interior steel features, the exterior and the roof and a redesign
of the centre logo.
More than 30 new tenants have commenced trading in the centre since the upgrade started, including Pep Stores, Dunns,
Ackermans, McDonald’s, KFC, Pie City, Gingers International, Heart and Sole Fish, Hero Pies & Hot Dogs, Ice Cream
Express, Fish Corner, Michael Brothers, Maharaj Pub & Grill, Edgars Connect, Spec Savers, FNB and Bidvest Bank.
Bellville: Barons VW building
The Bellville Barons VW building is situated at the Durban Road intersection with the N1 highway.
The first phase of the reconfiguration of the vacant space into a Barloworld Ford dealership was completed by
August 2016. The first phase consists of the workshop and services areas. The second phase, the new and second-hand
car show rooms and offices, commenced in January 2017 when Toys-R-Us vacated and will be completed by end July 2017.
The total capex is R35 million. A 10-year lease has been concluded with Barloworld Auto. A yield of 15.1%, net of
costs, is anticipated.
Phuthaditjhaba: Setsing Crescent
Setsing Crescent in Phuthaditjhaba was acquired with the Synergy transaction. The extension and upgrade of the
centre at a total cost of R338 million and a projected net yield of 8,5% in the first year after completion has
been approved. Flanagan & Gerard will be appointed as development managers for the project.
Setsing Crescent, with a current GLA of about 22 000m², is the second biggest shopping centre in Phuthaditjhaba.
The centre is anchored by a Super Spar, Game, Cashbuild, Clicks, all five major banks and a very strong national
fashion component including Woolworths, Foschini, Ackermans and Truworths. The proposed extension will increase the
GLA to c.34 000m² and the new tenants will include Pick n Pay as a second major food anchor. Most of the remainder
of the new area will be let to national fashion retailers. Additional parking and an undercover taxi rank will
also be provided.
Building work is scheduled to start in June 2017 for completion by end September 2018.
Dobsonville Mall: extension and partial upgrade
Dobsonville Mall, situated in northern Soweto, is currently being redeveloped, expanding its existing retail GLA
of 20 307m² by 6 738m², thereby increasing the total retail GLA to 27 045m². A capex amount of R114 million was
approved for the demolition of the office block (previously situated on the northern section of the site), the
extension of the shopping mall, the upgrade of the entrances, limited internal improvements and the creation of
a food court area. The projected net yield is 9.5%.
Pick n Pay anchors the northern extension of the mall with a 2 500m² supermarket scheduled to open for trade in late
August 2017. Additionally, the expanded area is 90% let comprising stores for Clicks, Foschini, Pick n Pay Liquor,
PQ Clothing, PEP Home among other ancillary retailers.
The mall continues to trade well attracting regular requests from prospective tenants to lease premises.
Randburg Square
Vukile’s conversion of its 8 000m² Randburg Square offices into 180 contemporary, compact residential
apartments has created a new vibrant urban living option in the heart of Randburg. The project was completed on
31 October 2016 at a cost of R81 million. With its quality compact living at affordable rentals, which range from
R4 200 for a bachelor flat to R6 500 for a two-bedroom unit, Randburg Square residences has experienced full
occupancy since early December 2016.
Current Vukile projects
A summary of major acquisitions and development projects approved and incurred to 31 March 2017 is set out below:
Paid to Budget
31 March April 2017 to
Approved 2017 March 2018
Approved projects Completion R000 R000 R000
Durban: The Workshop 28 February 2017 75 000 73 637 1 363
Boksburg: East Rand Mall 31 January 17 230 000 206 093 23 907
Durban: Phoenix Plaza 31 August 2017 24 500 7 981 16 519
Bellville: Barons Ford 30 July 2017 35 400 20 077 15 323
Dobsonville Centre Extension 31 August 2017 114 000 54 461 59 539
Thohoyandou: Thavhani Mall(I) 31 August 2017 350 076 - 350 076
Springs Mall 16 March 2017 260 000 260 000 -
Phuthaditjhaba: Setsing Crescent(II) 31 October 2018 338 000 - 167 887
Randburg Residential (inclusive of VAT) 30 October 2016 81 000 77 449 3 551
1 507 976 699 698 638 165
(I) The financing for Thavhani Mall has already been raised and is invested in a R350 million two-year deposit
earning 8.4% per annum, pending completion of this mall. The other projects will be financed out of the
proceeds from property sales and existing bank facilities.
(II) Further payments will be made after 31 March 2018.
Acquisitions - R3.1 billion
Springs Mall
Vukile has acquired a 25% stake in the 48 224m² Springs Mall for R260 million. The centre was developed and
is managed by Blue Crane Eco Mall (Pty) Ltd, in which Flanagan & Gerard is a shareholder.
Springs Mall opened on 16 March 2017 creating a superb new retail offering that was sorely lacking in the
town. The opening was a huge success with some 160 000 people visiting the mall during the first seven days
of trading.
At opening, the mall was fully let and anchored by Pick n Pay, Checkers, Woolworths and Edgars, while
negotiations are continuing with Game to also lease premises in the centre.
The initial yield of 8% is guaranteed by the developers.
The property was prefunded and is accretive from day one.
Pine Crest Shopping Centre
Vukile acquired the remaining 50% share of Pine Crest Shopping Centre, which is situated in Pinetown, KwaZulu-Natal.
The centre is a 40 087m² regional shopping centre with an average footfall of 930 000 per month. Pine Crest has
served the community for over 25 years and offers a quality retail shopping experience with over 90 stores, including
many of the biggest clothing brands in the country. Anchor tenants include Game, Pick n Pay, Woolworths and a new
Dis-Chem which will be introduced in July 2017. The 50% stake was purchased for R407 million at an initial yield of
8.6% and transfer was effected in March 2017.
Synergy portfolio
The Synergy retail portfolio of R2.4 billion was acquired as part of the Synergy, Vukile, Arrowhead transaction,
whereby Vukile acquired the Synergy retail portfolio in exchange for the bulk of its office and industrial
portfolio. Details of the portfolio that was acquired are as follows:
Purchase
price
Rm
Properties acquired from Synergy 2 474,6
Atlantis City Shopping Centre Retail 302,1
Elim Hubyeni Shopping Centre Retail 127,5
Emalahleni Highland Mews Retail 224,0
Ermelo Game Centre Retail 53,8
Gugulethu Square Retail 415,0
Hammanskraal Renbro Shopping Centre Retail 160,4
Hartbeespoort Sediba Shopping Centre Retail 121,5
Hillcrest Richdens Shopping Centre Retail 137,4
KwaMashu Shopping Centre Retail 103,3
Makhado Nzhelele Valley Shopping Centre Retail 55,9
Phuthaditjhaba Setsing Crescent Retail 328,0
Roodepoort Ruimsig Shopping Centre Retail 119,4
Ulundi King Senzangakona Shopping Centre Retail 262,3
Welgedacht Van Riebeeckshof Shopping Centre Retail 64,0
Property sales concluded during the year - R4.1 billion
In line with the group’s strategy to focus on retail assets the following properties were disposed of
during the year in addition to the Synergy/Vukile exchange transaction referred to above:
Sales Yield Dates of sale
R000 price %
Bloemfontein Fedsure House 89 700 8.6 31 August 2016
Pretoria Arcadia Suncardia 265 600 10.0 31 August 2016
Pretoria De Bruyn Park 305 100 9.3 31 August 2016
Pretoria Koedoe Arcade 129 700 12.2 31 August 2016
Pretoria Navarre Building 391 200 16.1 31 August 2016
Cape Town Bellville Louis Leipoldt 384 732 8.0 3 February 2017
Cape Town Parow De Tijger Day Clinic 32 672 8.0 14 February 2017
Cape Town Parow De Tijger Office Park 39 933 11.8 14 February 2017
1 638 637 11.0
The following portfolio consisting of mainly offices and industrial properties was sold to Synergy
(renamed to Gemgrow) in exchange for its retail portfolio. The effective date of the transaction was
1 October 2016 and the details are as follows:
Sales
price
Rm
Properties sold to Gemgrow 2 432,0
Cape Town Bellville Suntyger Offices 63,6
Cape Town Bellville Tijger Park Offices 241,3
Cape Town Parow Industrial Park Industrial 77,7
Durban Valley View Industrial Park Industrial 138,1
East London Vincent Office Park Offices 86,0
Germiston Meadowdale R24 Industrial 177,8
Johannesburg Isle of Houghton Offices 283,0
Johannesburg Parktown 55 Empire Road Offices 50,8
Midrand IBG Offices 71,1
Pinetown Westmead Kyalami Industrial Park Industrial 89,8
Pretoria Hatfield Festival Street Offices Offices 55,0
Pretoria High Court Chambers Offices 143,9
Pretoria Lynnwood Excel Park Offices 27,9
Pretoria Lynnwood Sanlynn Offices 145,0
Pretoria Lynnwood Sunwood Park Offices 66,0
Pretoria Silverton 22 Axle Street Industrial 11,3
Pretoria Silverton 294 Battery Street Industrial 23,6
Pretoria Silverton 301 Battery Street Industrial 18,5
Pretoria Silverton 309 Battery Street Industrial 20,9
Pretoria Silverton 330 Alwyn Street Industrial 4,7
Pretoria Silverton 34 Bearing Crescent Industrial 26,2
Randburg Trevallyn Industrial Park Industrial 144,0
Randburg Tungsten Industrial Park Industrial 55,4
Roodepoort Robertville Industrial Park Industrial 92,9
Sandton Bryanston Grosvenor Shopping Centre Retail 58,1
Sandton Bryanston St Andrews Complex Offices 86,9
Sandton Hyde Park 50 Sixth Road Offices 54,4
Sandton Rivonia 36 Homestead Road Offices 32,0
Sandton Sunninghill Place Offices 85,9
The proceeds from property sales have been used to repay debt, as well as provide funding for potential
accretive acquisitions, both locally and internationally.
8. BORROWINGS
The group’s finance strategy is to minimise funding costs and refinance risk. The business objectives that
are necessary to implement this strategy can be summarised as follows:
Strategy 2017 2016
Diversify funders to at least three providers Five funders Five funders
Diversify funding structures to incorporate, where appropriate: % of total % of total
Bank debt 63 69
Secured bonds 21 19
Commercial paper/unsecured bonds 16 12
100 100
Spread expiry terms of all interest-bearing debt to c.25% per annum Partly achieved Achieved
86.4%
Hedge or fix more than 75% of interest-bearing debt 95.1%(II) hedged(II)
Achieved through increase in
access facilities repayable
Maximise interest income and limit negative carry without break costs
(II) Vukile and its subsidiaries - excludes development debt and commercial paper.
Ratings
The Global Credit Rating Company (Pty) Ltd (GCR) has recently affirmed an “A” corporate rating with a positive
outlook and an “AA+” (RSA) rating on Vukile’s senior secured bonds.
Debt refinancing during the year ended 31 March 2017
Bond refinancing
- R200 million corporate bond was repaid in May 2016
- R85 million of commercial paper was repaid during the year under review
- R387 million of commercial paper was refinanced during the year.
Bank refinancing
Repayments
- R163.3 million bank debt was repaid in April 2016
- R617 million Absa debt was repaid during the year
- R160 million Standard Bank debt was paid in September 2016.
New loans
- £10.7 million (R180 million) Absa loan was raised in November 2016 to subscribe for an Atlantic Leaf equity raise
Loan amount Rate Expiry date
£1.35 million Libor + 2.45% 31 October 2021
£1.35 million Libor + 2.25% 31 October 2019
£4.0 million Hedged 2.99% 31 October 2019
£4.0 million Hedged 3.40% 31 October 2021
- €13 million (R186 million) Standard Bank loan was raised to finance an acquisition of an 86.89% shareholding
in Castellana
Loan amount Rate Expiry date
€6.5 million Eurobor + 2.38% 20 December 2020
€6.5 million Eurobor + 2.33% 20 December 2019
- R100 million Nedbank loan was raised to finance capex
Loan amount Rate Expiry date
R100 million Hedged 9.55% 30 January 2020
Increase in draw down of existing facilities to fund capital expenditure
- RMB - R59 million;
- Standard Bank - R122 million.
Equity issuance and dividend reinvestment (DRIP)
- Vukile issued 23 668 639 shares under an accelerated bookbuild on 21 April 2016 at R16.90 per share amounting
to R400 million.
- Shares issued under an election to reinvest cash dividends in return for shares are summarised as follows:
- 21 June 2016 - 19 307 492 shares (56%) at R16.15901 amounting to R312 million
- 21 December 2016 - 11 242 114 shares (42%) at R17.19 per share amounting to R193 million.
Encha equity tap structure
The existing Encha equity tap structure has been very successfully utilised to grow Vukile’s empowerment shareholding.
Given that the facilities expire in August 2017 and the success achieved, Vukile will propose to extend the
existing facility for a further year in order to access the unutilised portion of the facilities of R500 million
and further grow its empowerment credentials.
Debt repayment profile
The table below sets out the various tranches of debt payable by the group over the following 11 years:
Total
2025 gross
2018 2019 2020 2021 2022 2023 2024 to 2027 2028 debt
R000 R000 R000 R000 R000 R000 R000 R000 R000 R000
1 086 936 1 405 919 629 700 524 860 96 730 6 620 156 620 19 836 99 264 4 026 485
27.0% 34.9% 15.6% 13.0% 2.4% 0.2% 3.9% 0.5% 2.5% 100.0%
9. INTEREST RATE HEDGING
At year-end, net debt, excluding development loans and commercial paper, amounted to R3.74 billion.
Swaps totalling R3.56 billion have been concluded which equates to 95.1% of debt.
The swap expiry profile per financial year is set out below:
Swap expiry profile per financial year
31 March 31 March 31 March 31 March 31 March 31 March
2018 2019 2020 2021 2022 2023 Total
R000 R000 R000 R000 R000 R000 R000
181 667 647 208 260 916 1 233 254 836 583 401 000 3 560 628
5.1% 18.2% 7.3% 34.6% 23.5% 11.3% 100%
This table above reflects that 77% of swaps expire March 2020 and beyond.
The current swaps in place represent 3.4 years cover.
The company’s borrowing capacity is unlimited in terms of its Memorandum of Incorporation (MOI). The group’s
loan to value ratio at 31 March 2017 based on the directors’ valuations of the property portfolio was 29.2%
(March 2016: 31.9%) compared to the bank’s covenants of 50%, the DMTN covenants of 40% in respect of those
properties mortgaged as security under the DMTN programme and 45% in respect of total group debt as a
percentage of the value of total group investment properties. The group has unutilised bank facilities
of R471 million at 31 March 2017.
10. INTERNATIONAL EXPANSION
In the year ahead Vukile will look to increase its international exposure to developed Europe by pursuing both
the UK and Spanish markets. The UK exposure will be driven through its strategic 29.56% shareholding in
Atlantic Leaf.
The Spanish economy is currently providing one of the most attractive growth rates in the European Union and
is showing a steadily improving economic outlook as evidenced by its recent credit upgrade. Consumption
expenditure is rising and unemployment rates are falling. Tourism continues its upward trajectory.
Against this backdrop, Vukile will look to increase its exposure to Spain through its majority shareholding
in Castellana and is currently actively reviewing a retail portfolio.
11. PROSPECTS
Vukile is very well positioned as a defensive, conservatively geared and managed retail REIT able to navigate
an increasingly fragile economic and political environment in South Africa. As stated previously, the local
focus will continue to be around accretive expansion and development opportunities within its own portfolio
and, where possible, through acquisitions.
The group has a strong balance sheet with approximately R1.5 billion of resources available following the sale of
its sovereign portfolio and other non-core assets. The available cash is earmarked for international expansion
and Vukile is currently actively evaluating an opportunity in Spain to diversify its earnings stream and enhance
its high-quality portfolio. The timing of the investment will impact on the growth in distributions in the
financial year ending 31 March 2018.
If the current opportunities being explored are concluded within the anticipated timeline, Vukile expects to deliver
growth in dividends of between 7% and 8% for the year ahead while stronger long-term growth will be underpinned
by its well-positioned South African retail REIT platform and increased offshore exposure.
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.
12. DECLARATION OF A CASH DIVIDEND WITH THE ELECTION TO REINVEST THE CASH DISTRIBUTION IN RETURN FOR VUKILE SHARES
Notice is hereby given of a gross dividend amounting to 89.10250 cents per share, out of distributable income, for the
six-month period to 31 March 2017.
Shareholders will be entitled to elect (in respect of all or part of their holding) to reinvest the cash distribution
of 89.10250 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 or about 26 May 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, No 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 89.10250 cents per share meets the requirements of a “qualifying distribution” for the purposes of section 25BB of
the Income Tax Act (a qualifying distribution) with the result that:
- 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 dividends are taxable as income in
the hands of the Vukile shareholder. These 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 distribution 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 abovementioned documents to be submitted prior to payment of
the distribution, if such documents have not already been submitted.
- 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 dividends received by non-residents were not subject to dividends withholding tax.
On 22 February 2017 the dividend withholding tax rate increased from 15% to 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 distribution amount due to non-resident shareholders
is 71.28200 cents per share. A reduced dividend withholding rate in terms of the applicable DTA, may only be relied upon if the
non-resident holder has provided the following forms to their CSDP or broker, as the case may be, in respect of uncertificated
shares, or the company, in respect of certificated shares:
- A declaration that the dividend is subject to a reduced rate as a result of the application of a DTA
- A written undertaking to inform their CSDP, broker or the company, as the case may be, should the circumstances affecting
the reduced rate change or the beneficial owner cease to be the beneficial owner
both in the form prescribed by the Commissioner for the South African Revenue Service. Non-resident holders are advised to contact
their CSDP, broker or the company, as the case may be, to arrange for the abovementioned documents to be submitted prior to payment
of the distribution if such documents have not already been submitted, if applicable.
Shareholders who are South African residents are advised that in electing to participate in the share reinvestment alternative,
pre-taxation funds are utilised for the reinvestment purposes and that taxation will be due on the total cash dividend amount
of 89.10250 cents per share.
Shareholders are further advised that:
- the issued capital of Vukile is 701 885 532 shares of one cent each at 22 May 2017
- 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:
2017
Circular and form of election posted to shareholders Friday, 26 May
Finalisation information including the ratio and price per share
published on SENS Monday, 12 June
Last day to trade in order to participate in the election to receive
the share reinvestment alternative or to receive a cash dividend (LDT) Tuesday, 20 June
Share trade ex distribution Wednesday, 21 June
Listing of maximum possible number of shares under the share
reinvestment alternative Friday, 23 June
Last day to elect to receive the share reinvestment alternative or to
receive a cash dividend (no late forms of election will be accepted)
at 12:00 (SA time) Friday, 23 June
Record date for the election to receive the share reinvestment
alternative or to receive a cash dividend (record date) Friday, 23 June
Results of cash dividend and share reinvestment alternative
published on SENS Monday, 26 June
Cash distribution cheques posted to certificated shareholders
on or about Monday, 26 June
Accounts credited by CSDP or broker to dematerialised holders
with the cash dividend payment Monday, 26 June
Certificates posted to certificated shareholders on or about Wednesday, 28 June
Accounts updated with new shares (if applicable) by CSDP or broker to
dematerialised shareholders Wednesday, 28 June
Adjustment to shares listed on or about Friday, 30 June
Notes:
1. Shareholders electing the share reinvestment alternative are alerted to the fact that the new shares will be listed on
LDT + 3 and that these new shares can only be traded on LDT +3, due to the fact that settlement of the shares will be
three days after record date, which differs from the conventional one day after record date settlement process.
2. Shares may not be dematerialised or rematerialised between Tuesday, 20 June 2017 and Friday, 23 June 2017,
both days inclusive.
3. The above dates and times are subject to change. Any changes will be released on SENS.
13. BASIS OF PREPARATION
The summarised audited consolidated financial statements for the year ended 31 March 2017, and comparative information,
have been prepared in accordance with and containing the information required by International Financial Reporting
Standards (IFRS), International Accounting Standard (IAS) 34 Interim Financial Reporting, the SAICA Financial Reporting
Guides as issued by the Accounting Practices Committee and Financial Reporting Announcements as issued by the Financial
Reporting Standards Council, the JSE Listings Requirements and relevant sections of the South African Companies Act.
Except for the amendments adopted as set out below, all accounting policies applied by the group in the preparation of
these consolidated financial statements are consistent with those applied by the group in its consolidated financial
statements as at and for the year ended 31 March 2016. The group has adopted the following amendments to standards which
were effective for the first time for the financial period commencing 1 April 2016:
Amendments to IFRS 10 - Consolidated Financial Statements
Amendments to IFRS 11 - Joint Arrangements
Amendments to IAS 1 - Presentation of Financial Statements
Amendments to IAS 16 - Property, Plant, and Equipment
Amendments to IAS 28 - Investments in Associates
Amendments to IAS 38 - Intangible Assets.
There was no material impact identified on the financial statements based on management’s assessment of these amendments.
These statements, which comprise the statement of financial position at 31 March 2017 and the statement of comprehensive income,
statement of changes in equity and statement of cash flows for the 12 months then ended is extracted from audited information,
but is itself not audited. The annual financial statements were audited by Grant Thornton, who expressed an unmodified opinion
thereon. The auditor’s report does not necessarily cover all of the information included in this announcement. Shareholders are
therefore advised that, in order to obtain a full understanding of the nature of the auditor’s work, they should obtain a copy
of the audit report together with the accompanying financial information from the registered office of the company situated at
Ground Floor, One-On-Ninth, Corner Glenhove Road and 9th Street, Melrose Estate.
The directors take full responsibility for the preparation of this report and that the financial information has been correctly
extracted from the underlying financial statements.
This report was compiled under the supervision of Michael John Potts CA(SA), the financial director of the company.
The directors are not aware of any matters or circumstances arising subsequent to 31 March 2017 that require any additional
disclosure or adjustment to the financial statements and which are not disclosed in this announcement.
On behalf of the board
AD Botha LG Rapp
Chairman Chief executive officer
Melrose Estate
23 May 2017
SUMMARISED ANNUAL FINANCIAL STATEMENTS
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 March 2017
2017 2016
GROUP R000 R000
ASSETS
Non-current assets 15 850 308 15 525 681
Investment properties 13 168 339 13 302 386
Investment properties 13 497 445 13 737 892
Straight-line rental income adjustment (329 106) (435 506)
Other non-current assets 2 681 969 2 223 295
Straight-line rental income asset 329 106 435 506
Investment in associate 780 347 760 049
Equity investments 1 366 239 328 247
Investment properties under development 51 191 87 033
Furniture, fittings, computer equipment and other intangible assets 14 049 2 127
Available-for-sale financial asset 23 855 19 842
Goodwill 63 009 158 372
Derivative financial instruments 1 722 41 230
Deferred taxation assets 14 341 2 779
Long-term cash deposit - 350 000
Long-term loans granted 38 110 38 110
Current assets 1 589 768 831 794
Trade and other receivables 256 405 246 873
Short-term derivative financial instruments 1 752 1 245
Current taxation assets 1 666 1 217
Cash and cash equivalents 1 329 945 582 459
Investment properties held for sale 76 632 1 997 744
Total assets 17 516 708 18 355 219
EQUITY AND RESERVES
Equity attributable to owners of the parent 13 111 425 11 932 574
Non-controlling interest 73 367 556 681
Non-current liabilities 2 964 638 4 114 331
Other interest-bearing borrowings 2 937 590 4 098 319
Derivative financial instruments 26 115 5 269
Deferred taxation liabilities 933 10 743
Current liabilities 1 367 278 1 751 633
Trade and other payables 354 370 439 937
Borrowings 1 002 581 1 309 687
Current taxation liabilities 8 892 2 009
Shareholders for dividend 1 435 -
Total equity and liabilities 17 516 708 18 355 219
Net asset value (cents per share) 1 868 1 842
SUMMARISED CONSOLIDATED STATEMENT OF PROFIT AND LOSS
for the year ended 31 March 2017
2017 2016
GROUP R000 R000
Property revenue 1 964 202 2 096 400
Straight-line rental income accrual (161 077) 243 221
Gross property revenue 1 803 125 2 339 621
Property expenses (717 970) (780 584)
Net profit from property operations 1 085 155 1 559 037
Net income from asset management business - 2 074
Corporate and administrative expenses (96 155) (84 288)
Investment and other income 198 523 99 337
Operating profit before finance costs 1 187 523 1 576 160
Finance costs (362 074) (394 301)
Profit before capital items 825 449 1 181 859
Profit/(loss) on sale of investment properties 25 250 (31 883)
Profit on sale of furniture, fittings and equipment 92 -
Fair value gain/(loss) on listed property securities 105 739 (98 425)
Fair value movement of derivative financial instruments (6 251) (1 342)
Profit on sale of subsidiary 54 813 -
Foreign exchange profit 83 679 26 825
Loss of control on subsidiary (276 781) -
Profit on sale of listed property securities - 547
Other capital items (971) -
Gain on bargain purchase price - 1 053
Goodwill written off on sale of properties by a subsidiary (3 889) (4 951)
Costs of acquisition of business combination (66) (1 230)
Profit before fair value adjustments 807 064 1 072 453
Fair value adjustments 693 521 560 049
Gross change in fair value of investment properties 532 444 803 270
Straight-line rental income adjustment 161 077 (243 221)
Profit before equity accounted investment 1 500 585 1 632 502
Profit share of associate 45 251 19 423
Profit before taxation 1 545 836 1 651 925
Taxation (9 286) (9 076)
Profit for the year 1 536 550 1 642 849
Profit attributable to:
Owners of the parent 1 499 420 1 586 079
Non-controlling interests 37 130 56 770
Other comprehensive (loss)/income
Items that will be reclassified subsequently to profit or loss
Currency loss on translation of investment in foreign entities (157 781) (7 377)
Cash flow hedges
- Current period (losses)/gains (net of tax) (42 547) 40 673
- Reclassification to profit and loss (net of tax) 3 224 -
Available-for-sale financial assets - current year loss (15 206) (21 498)
Other comprehensive (loss)/income for the year (212 310) 11 798
Total comprehensive income for the year 1 324 240 1 654 647
Total comprehensive income attributable to:
Owners of the parent 1 287 981 1 597 664
Non-controlling interest 36 259 56 983
Basic and diluted earnings per share (cents) 217 93 249 55
Weighted average number of shares in issue 688 024 118 635 569 998
Number of shares in issue 701 885 532 647 667 287
Vukile has no dilutionary shares in issue
RECONCILIATION OF EARNINGS TO HEADLINE EARNINGS
for the year ended 31 March 2017
2017 2016
Group Cents per Group Cents per
R000 share R000 share
Attributable profit to owners
of the parent 1 499 420 217.93 1 586 079 249.55
Earnings 1 499 420 217.93 1 586 079 249.55
Change in fair value of investment properties
(net of allocation to non-controlling interest) (676 899) (98.38) (546 188) (85.94)
Gain on bargain purchase - - (1 053) (0.17)
Write-off of goodwill on sale of properties
sold by a subsidiary 3 889 0.56 4 951 0.78
(Profit)/loss on sale of investment properties (25 250) (3.67) 31 883 5.02
Profit on sale of furniture, fittings,
computer equipment and other (92) (0.01) - -
Profit on sale of subsidiary (54 813) (7.97) - -
Loss of control of subsidiary 276 781 40.23 - -
Profit on sale of listed securities - - (547) (0.08)
Fair value earnings of associate-adjusted
headline earnings 16 804 2.44 (7 353) (1.16)
Headline earnings of shares 1 039 840 151.13 1 067 772 168.00
Weighted average number of shares in issue 688 024 118 635 569 998
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOW
for the year ended 31 March 2017
2017 2016
Group Group
R000 R000
Cash flow from operating activities 1 104 588 1 282 446
Cash flow from investing activities 429 231 (2 124 331)
Cash flow from financing activities (1 135 957) 1 300 455
Net increase in cash and cash equivalents 397 862 458 570
Foreign currency movement in cash (376) -
Cash and cash equivalents at the beginning of the year 932 459 473 889
Cash and cash equivalents at the end of the year 1 329 945 932 459
Major items included in the above
Cash flow from operating activities
Profit before tax 1 545 836 1 651 925
Adjustments (378 051) (402 521)
Cash flow from investing activities
Acquisition of and improvements to investment properties (3 466 306) (1 578 544)
Investment in associate (180 677) (758 570)
Net proceeds on sale of investment properties 4 113 776 327 356
Cash flow from financing activities
Issue of shares 902 251 1 347 944
Dividends paid (1 049 031) (937 494)
Finance costs (355 764) (389 522)
Interest-bearing borrowings (repaid)/advanced (622 473) 1 280 901
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2017
Share
capital Non- Shareholders’ Non-
and share distributable Retained interest controlling
R000 premium reserves earnings Total interest Total
GROUP
Balance at 31 March 2015 5 672 340 3 683 386 474 920 9 830 646 516 317 10 346 963
Issue of shares 1 396 223 - - 1 396 223 - 1 396 223
Dividend distribution - - (901 643) (901 643) (35 851) (937 494)
7 068 563 3 683 386 (426 723) 10 325 226 480 466 10 805 692
Profit for the year - - 1 586 079 1 586 079 56 770 1 642 849
Change in fair value of
investment properties - 803 270 (803 270) - - -
Change in fair value of
investments attributable to
non-controlling interest - (13 860) 13 860 - - -
Share-based remuneration - 15 770 - 15 770 - 15 770
Deferred taxation on change in
fair value of derivatives - (10 417) - (10 417) - (10 417)
Transfer from non-distributable
reserve - (8 409) 8 409 - - -
Cost of conversion of debentures
to stated capital by subsidiary - (710) - (710) (389) (1 099)
Gain from change in shareholding
in subsidiary - 5 041 - 5 041 (5 863) (822)
Non-controlling interest arising
on business combination acquired - - - - 25 484 25 484
Revaluation of investments - (98 425) 98 425 - - -
Other comprehensive income - 11 585 - 11 585 213 11 798
Balance at 31 March 2016 7 068 563 4 387 231 476 780 11 932 574 556 681 12 489 255
Issue of capital 902 251 - - 902 251 - 902 251
Dividend distribution - - (1 025 270) (1 025 270) (25 196) (1 050 466)
7 970 814 4 387 231 (548 490) 11 809 555 531 485 12 341 040
Profit for the year - - 1 499 420 1 499 420 37 130 1 536 550
Change in fair value of
investment properties - 532 444 (532 444) - - -
Change in fair value of
investments attributable to
non-controlling interest - (16 622) 16 622 - - -
Share-based remuneration - 17 413 - 17 413 - 17 413
Deferred taxation on change
in fair value of derivatives - 1 750 - 1 750 - 1 750
Transfer to non-distributable
reserve - 104 024 (103 315) 709 - 709
Non-controlling interest
arising on business
combination acquired - - - - 26 855 26 855
Share issue expenses of a
subsidiary - (7 111) - (7 111) (3 829) (10 940)
Loss of control of subsidiary - (231 623) 232 751 1 128 (517 403) (516 275)
Revaluation of investments - 105 739 (105 739) - - -
Other comprehensive loss - (211 439) - (211 439) (871) (212 310)
Balance at 31 March 2017 7 970 814 4 681 806 458 805 13 111 425 73 367 13 184 792
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 year to 31 March 2017, there has been no change from prior periods in the measurement methods used
to determine operating segments and reported segment profits.
Operating segments analysis for the year ended 31 March 2017
Retail - Retail -
Vukile Synergy Offices Industrial Residential
GROUP R000 R000 R000 R000 R000
Group income for the year ended 31 March 2017
Property revenue 971 669 130 497 161 734 88 742 6 013
Straight-line rental income accrual (104 301) (14 084) (18 348) (9 588) (518)
867 368 116 413 143 386 79 154 5 495
Property expenses (net of recoveries) (168 820) (22 086) (20 501) (14 938) (2 022)
Profit from property and other operations 698 548 94 327 122 885 64 216 3 473
Group statement of financial
position at 31 March 2017
Assets
Investment properties 11 993 956 420 476 477 580 78 961
Add: Lease commissions
Goodwill 48 218
Investment properties held for sale 76 632
12 042 174 497 108 477 580 78 961
Add: Excluded items
Investment property under development
Equity investments
Investment in associate
Furniture, fittings, computer equipment
and other intangible assets
Available-for-sale financial asset
Derivative financial instruments
Loans receivable
Deferred taxation assets
Trade and other receivables
Taxation refundable
Cash and cash equivalents
Total assets
Equity and liabilities
Stated capital 7 053 483 292 343 280 859 46 436
Interest-bearing borrowings 3 486 712 144 512 138 836 22 954
10 540 195 436 855 419 695 69 390
Add: Excluded items
Other components of equity and retained earnings
Non-controlling interest
Derivative financial instruments
Deferred taxation liabilities
Trade and other payables
Current taxation liabilities
Shareholder for dividend
Total equity and liabilities
Operating segments analysis for the year ended 31 March 2017 (continued)
Foreign
Motor business Total
Sovereign Hospital related Total combination group
GROUP R000 R000 R000 R000 R000 R000
Group income for the year ended 31 March 2017
Property revenue 56 704 26 785 12 070 1 454 214 7 131 1 461 345
Straight-line rental income accrual (9 293) (3 420) (1 525) (161 077) - (161 077)
47 411 23 365 10 545 1 293 137 7 131 1 300 268
Property expenses (net of recoveries) 14 829 (462) (335) (214 335) (778) (215 113)
Profit from property and other operations 62 240 22 903 10 210 1 078 802 6 353 1 085 155
Group statement of financial
position at 31 March 2017
Assets
Investment properties 155 951 13 126 924 350 254 13 477 178
Add: Lease commissions 20 267 20 267
13 147 191 13 497 445
Goodwill 48 218 14 791 63 009
Investment properties held for sale 76 632 76 632
155 951 13 272 041 365 045 13 637 086
Add: Excluded items
Investment property under development 51 191
Equity investments 1 366 239
Investment in associate 780 347
Furniture, fittings, computer equipment
and other intangible assets 14 049
Available-for-sale financial asset 23 855
Derivative financial instruments 3 474
Loans receivable 38 110
Deferred taxation assets 14 341
Trade and other receivables 256 405
Taxation refundable 1 666
Cash and cash equivalents 1 329 945
Total assets 17 516 708
Equity and liabilities
Stated capital 91 713 7 764 834 205 980 7 970 814
Interest-bearing borrowings 45 336 3 838 350 101 821 3 940 171
137 049 11 603 184 307 801 11 910 985
Add: Excluded items
Other components of equity and retained earnings 5 140 611
Non-controlling interest 73 367
Derivative financial instruments 26 115
Deferred taxation liabilities 933
Trade and other payables 354 370
Current taxation liabilities 8 892
Shareholder for dividend 1 435
Total equity and liabilities 17 516 708
Operating segments analysis for the year ended 31 March 2016
Retail - Retail -
Vukile Synergy Offices Industrial Residential
GROUP R000 R000 R000 R000 R000
Group income for the year ended 31 March 2016
Property revenue 755 239 250 024 270 331 133 659 1 091
Straight-line rental income accrual 114 687 39 266 40 799 20 367 140
869 926 289 290 311 130 154 026 1 231
Property expenses (net of recoveries) (134 785) (37 598) (49 608) (23 474) (334)
Profit from property and other operations 735 141 251 692 261 522 130 552 897
Group statement of financial position
at 31 March 2016
Assets
Investment properties 7 914 475 2 441 576 1 848 992 1 283 406 22 200
Add: Lease commissions
Goodwill 48 218 3 889
Investment properties held for sale 254 439 429 305
8 217 132 2 441 576 2 278 297 1 287 295 22 200
Add: Excluded items
Investment property under development
Equity investments
Investment in associate
Furniture, fittings and computer equipment
Available-for-sale financial asset
Derivative financial instruments
Loans receivable
Long-term cash deposit
Deferred taxation assets
Trade and other receivables
Taxation refundable
Cash and cash equivalents
Total assets
Equity and liabilities
Stated capital 3 679 264 1 099 682 1 026 142 578 047 9 999
Interest-bearing borrowings 2 814 925 841 343 785 082 442 249 7 650
6 494 189 1 941 025 1 811 224 1 020 296 17 649
Add: Excluded items
Other components of equity and retained earnings
Non-controlling interest
Derivative financial instruments
Deferred taxation liabilities
Trade and other payables
Current taxation liabilities
Total equity and liabilities
Operating segments analysis for the year ended 31 March 2016 (continued)
Asset
Motor management Total
Sovereign Hospital related Total business group
GROUP R000 R000 R000 R000 R000 R000
Group income for the year ended 31 March 2016
Property revenue 126 690 28 857 11 005 1 576 896 2 074 1 578 970
Straight-line rental income accrual 20 718 5 267 1 977 243 221 - 243 221
147 408 34 124 12 982 1 820 117 2 074 1 822 191
Property expenses (net of recoveries) (14 609) (365) (307) (261 080) - (261 080)
Profit from property and other operations 132 799 33 759 12 675 1 559 037 2 074 1 561 111
Group statement of financial position
at 31 March 2016
Assets
Investment properties 30 791 154 834 13 696 274 13 696 274
Add: Lease commissions 41 618 41 618
13 737 892 13 737 892
Goodwill 52 107 106 265 158 372
Investment properties held for sale 937 350 376 650 1 997 744 1 997 744
937 350 407 441 154 834 15 787 743 106 265 15 894 008
Add: Excluded items
Investment property under development 87 033
Equity investments 328 247
Investment in associate 760 049
Furniture, fittings and computer equipment 2 127
Available-for-sale financial asset 19 842
Derivative financial instruments 42 475
Loans receivable 38 110
Long-term cash deposit 350 000
Deferred taxation assets 2 779
Trade and other receivables 246 873
Taxation refundable 1 217
Cash and cash equivalents 582 459
Total assets 18 355 219
Equity and liabilities
Stated capital 422 181 183 511 69 737 7 068 563 7 068 563
Interest-bearing borrowings 323 002 140 400 53 355 5 408 006 5 408 006
745 183 323 911 123 092 12 476 569 12 476 569
Add: Excluded items
Other components of equity and retained earnings 4 864 011
Non-controlling interest 556 681
Derivative financial instruments 5 269
Deferred taxation liabilities 10 743
Trade and other payables 439 937
Current taxation liabilities 2 009
Total equity and liabilities 18 355 219
NOTES TO THE SUMMARISED FINANCIAL STATEMENTS
for the year ended 31 March 2017
1. CALCULATION OF DISTRIBUTABLE EARNINGS
Audited Group Audited Group
31 March 2017 31 March 2016
R000 R000
Property revenue 1 964 202 2 096 400
Property expenses (717 970) (780 584)
Corporate and administrative expenses (96 155) (84 288)
Net income from asset management business - 2 074
Investment and other income 198 523 99 337
Finance costs (362 074) (394 301)
Realised profit on sale of subsidiary 54 813 -
Profit share of associate 45 251 19 423
Taxation (9 286) (9 076)
Attributable to non-controlling interests (37 130) (42 910)
Loss of control of Synergy (21 122) -
Pre-acquisition dividends 6 828 -
Project management fees from Sanlam 8 000 8 000
Shares issued cum dividend 31 847 63 024
Dividends receivable from listed securities 51 954 19 213
1 117 681 996 312
2. MEASUREMENTS OF FAIR VALUE
2.1 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:
2017 2016
Level 1 Level 2 Total Level 1 Level 2 Total
GROUP R000 R000 R000 R000 R000 R000
ASSETS
Investments 1 366 239 - 1 366 239 328 247 - 328 247
Available-for-sale financial assets 55 342 - 55 342 57 324 - 57 324
Derivative financial instruments - 3 474 3 474 - 42 475 42 475
Total 1 421 581 3 474 1 425 055 385 571 42 475 428 046
LIABILITIES
Available-for-sale financial
liabilities - (31 487) (31 487) - (37 482) (37 482)
Derivative financial instruments - (26 115) (26 115) - (5 269) (5 269)
Total - (57 602) (57 602) - (42 751) (42 751)
Net fair value 1 421 581 (54 128) 1 367 453 385 571 (276) 385 295
Measurement of fair value
The methods and valuation techniques used for the purpose of measuring fair value are unchanged compared to the
previous reporting period.
Investments
This comprises shares held in listed property companies at fair value which is determined by reference to quoted
closing prices at the reporting date.
Available-for-sale financial assets
This comprises equity-settled share-based long-term incentive reimbursement rights stated at fair value. Fair value
has been determined by reference to Vukile’s quoted closing price at the reporting date after deduction of executive
and management rights.
Derivative financial instruments
The fair values of these swap contracts are determined by Absa Capital, Rand Merchant Bank, Standard Bank and
Investec Bank Limited using a valuation technique that maximises the use of observable market inputs. Derivatives
entered into by the group are included in level 2 and consist of interest rate swap contracts.
2.2 Non-financial assets
The following table reflects the levels within the hierarchy of non-financial assets measured at fair value at
31 March 2017:
2017 2016
Level 3 Level 3
R000 R000
ASSETS
Investment properties 13 497 445 13 737 892
Investment properties held for sale 76 632 1 997 744
Fair value measurement of non-financial assets (investment properties)
The fair values of commercial buildings are estimated using an income approach which capitalises the estimated
rental income stream, net of projected operating costs, using a discount rate derived from market yields.
The estimated rental stream takes into account current occupancy levels, estimates of future vacancy levels,
the terms of in-place leases and expectations of rentals from future leases over the remaining economic life
of the buildings.
The most significant inputs are the estimated rental value, assumptions regarding vacancy levels, the discount
rate and the reversionary capitalisation rate. The estimated fair value increases if the estimated rental
increases, vacancy levels decline or if discount rates (market yields) and reversionary capitalisation rates
decline. The overall valuations are sensitive to all four assumptions. Management considers the range of
reasonable possible alternative assumptions is greatest for reversionary capitalisation rate rental values
and vacancy levels and that there is also an interrelationship between these inputs. The inputs used in the
valuations at 31 March 2017 were:
- The range of the reversionary capitalisation rates applied to the portfolio are between 8.0% and 15.7%
(March 2016: between 7.8% and 16.5%) with the weighted average being 9.1% (March 2016: 9.7%).
- The discount rates applied range between 12.8% and 19.6% (March 2016: between 12.8% and 19.6%) with the
weighted average being 14.0% (March 2016: 14.2%).
Sensitivity analysis
The effect on the fair value of the portfolio of a 0.25% increase in the discount rate would result in a
decrease in the fair value of R370 million (2.8%) (March 2016: R420 million (2.7%)). The average discount
rate on the portfolio would increase from 14.0% to 14.3% (March 2016: 14.2% to 14.5%) and the average exit
capitalisation rate would increase from 9.1% to 9.4% (March 2016: 9.7% to 9.9%) due to the interlinked nature
of the rates. The analysis has been prepared on the assumption that all other variables remain constant.
In determining future cash flows for valuation purposes, vacancies are forecast for each property based
on estimated demand.
3. ACQUISITION OF BUSINESS COMBINATION - CASTELLANA
Vukile acquired control of Castellana, an unlisted Spanish SOCIMI, effective 20 December 2016, through the
acquisition of 86.89% of the shares in the company. The total investment in Castellana comprises 2.2 million
shares and the purchase price was settled by way of cash.
Castellana owns two call centre properties, both let to a call centre operating company, Konecta, on a fifteen
year, triple net lease basis.
The details of the business combination are as follows:
€000 R000
Cost of investment in Castellana 13 165 193 123
Recognised amounts of identifiable net assets 12 131 177 953
Goodwill calculated on acquisition 1 034 15 170
EUR/ZAR exchange rate at acquisition 14.669
Assets
Non-current assets
Investment property 24 488 359 214
Non-current tenant deposits 294 4 315
Current assets
Other current assets 40 589
Cash and cash equivalents 1 004 14 722
Total assets 25 826 378 840
Equity and reserves
Shareholders’ interest 13 962 204 808
Non-current liabilities
Borrowings 11 559 169 565
Other non-current payables 294 4 315
Current liabilities
Trade and other payables 11 152
Total equity and liabilities 25 826 378 840
Cash outflow on date of acquisition (193 123)
Cash acquired 19 037
Consideration settled through net cash (174 086)
The non-controlling interest (13.11%) at acquisition date amounted to €1.83 million or R26.85 million.
The revenue and profit generated since acquisition date to 31 March 2017 included in the consolidated
statement of profit and loss amounted to €506 000 (R7.1 million) and €348 000 (R4.9 million) respectively.
Had this acquisition been made at the beginning of the year, additional revenue of R16.5 million and
profit after interest and tax of R13 million would have been included in the group results and the revenue
and profit after tax for the group would have been R1 981 million and R1 550 million, respectively.
Corporate profile
Vukile is a high quality, low-risk retail REIT. Its core strength in active asset management drives its strong
operational performance. It has an entrepreneurial approach to deal making and a conservative approach to
financial management and balance sheet structure, as well as deep capital markets expertise. Listed on the
JSE and NSX, its proven management track record shows active commitment to good corporate governance and
sector leadership. From its strong South African base, Vukile is well positioned to expand its business
offshore. Vukile has consistently delivered long-term sustainable returns to shareholders, providing a
21.8% compound annual growth rate since listing in 2004.
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, Corner Glenhove Road and Ninth Street, Melrose Estate, 2196
Company secretary: J Neethling
Transfer secretaries: Link Market Services South Africa (Pty) Ltd, Braamfontein, Johannesburg
Investor and media relations: Marketing Concepts, 10th Floor, Fredman Towers, 13 Fredman Drive, Sandton, Johannesburg,
South Africa. Tel: +27 11 783 0700, Fax: +27 11 783 3702
Availability of information - the results presentation will be made available at 12:00 on 24 May 2017, on the
company’s website at www.vukile.co.za
24 May 2017
Date: 24/05/2017 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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