Wrap Text
Unaudited condensed consolidated interim results for the six months ended 30 September 2018
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
Debt company code: VKEI
(Granted REIT Status with the JSE)
(Vukile or the group or the company)
UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
Highlights
7.5% increase
- In dividends in line with guidance to 78.10 cents per share
Gathering significant momentum in Spain
- Investment properties increased to c.EUR900 million from EUR308 million followingthe acquisition of
5 dominant shopping centres
- Castellana* listed on the junior board in Madrid on 25 July 2018
- Positive benefits of diversification with a solid pipeline of opportunities
* Castellana Properties SOCIMI S.A, a 97.5% held Spanish subsidiary of the Vukile group
Impressive asset management result from Castellana
- 11 retail parks acquired in June 2017 now fully let post yield enhancing asset management initiatives
- Organic growth in the value of investment properties of 8.8% relative to acquisition price
- Full strength, experienced team now in place
Solid operating performance in southern Africa
- Like for like net income growth of 5.1%
- Retail reversions still positive at +4.3% in difficult trading conditions
- Retail vacancies maintained at 3.4% with 87% tenant retention
- Portfolio rent to sales ratio remains ahead of industry averages
Strong capital market support
- Gearing at 38% with 94% of debt hedged
- Corporate long-term credit rating upgraded to A+(ZA)
- Raised R1.6 billion in over-subscribed book-build in July 2018
- Raised R825 million in domestic medium term note programme
Commentary
1. NATURE OF OPERATIONS
Vukile is a property holding and investment company with direct and indirect ownership of immovable property.
The group has invested in a portfolio of predominantly retail property assets in southern Africa as well as
strategic shareholdings in listed Real Estate Investment Trusts (REITs).
The company is listed on the Johannesburg Stock Exchange (JSE) and the Namibian Stock Exchange (NSX) under the
Retail REITs sector. Castellana Properties Socimi S.A (Castellana), a 97.5% owned subsidiary of Vukile, is listed
on the Mercado Alternativo Bursatil (MAB) in Spain.
The group has significant property investments in Spain and in the United Kingdom with a focus on retail and
logistics respectively. The group has more than trebled its investment in retail properties in Spain from
R4.56 billion at 31 March 2018 to R14.77 billion at 30 September 2018. The group has maintained its clear
strategy of investing in dominant, high quality retail parks and shopping centres in Spain, whilst retaining
an appetite for earnings enhancing local acquisitions.
2. SIGNIFICANT EVENTS AND TRANSACTIONS
The following significant events and transactions took place during the six months to 30 September 2018:
- Castellana acquired the Habaneras Shopping Centre on 9 May 2018 for EUR80.6 million;
- Vukile subscribed for a 51% stake in Morzal Properties Iberia S.L. (Morzal). The balance of the shareholding
in Morzal was subscribed for by co-investors. Morzal acquired four shopping centres from Unibail - Rodamco -
Westfield at a cost of EUR480 million, including acquisition costs of EUR19 million, effective on 31 July 2018.
The shares in Morzal were exchanged for shares in Castellana on 27 November 2018 on a share-for-share basis,
resulting in Morzal becoming a 100% subsidiary of Castellana. Subsequent to these acquisitions the Spanish
investment properties will represent 50.2% of Vukile's group investment properties*;
- Vukile raised capital of R1.63 billion on 18 July 2018 of which R1.38 billion was raised pursuant to a heavily
oversubscribed book-build at R18.66 per share, and R250 million was raised by way of a placement with the
Encha Special Purpose Vehicle in terms of the Encha equity funding platform;
- Global Credit Rating Co. (GCR) upgraded Vukile's corporate long-term credit rating to A+(ZA) with the outlook
accorded as stable, and reaffirmed Vukile's corporate short-term rating of A1(ZA) and secured long-term credit
rating of AA+(ZA).This has resulted in a tightening of margins when issuing unsecured bonds; and
- Castellana was listed on the MAB on 25 July 2018. The shares were listed by way of introduction at
EUR6.00 per share, which attributed a market capitalisation to Castellana of c.EUR204 million at that date.
The listing ensures that Castellana complies with applicable Spanish tax legislation in order for Castellana
to maintain its REIT status.
* net of straight-lining, based on the summarised operating segment report at 30 September 2018
3. COMMENTARY ON GROUP RESULTS FOR THE SIX MONTH PERIOD ENDED 30 SEPTEMBER 2018
Dividend growth
The directors of Vukile are pleased to report that the dividend for the six months ended 30 September 2018 has
increased by 7.5% to 78.10251 cents per share (prior period: 72.65350 cents per share).
The group's net profit available for distribution amounted to R713.5 million for the six months to 30 September 2018
(September 2017: R578.5 million), which represents an increase of 23.3% over the comparable period.
Property income and profit before taxation
At reporting date, the geographic contribution and percentage split to group gross and net property income is
represented below:
30 September 2018
Gross Property Net Profit from
Revenue(2) Property Operations
Operating Segment R000 % R000 %
Vukile (Southern Africa) 721 251 70.0 594 432 71.3
Castellana and Morzal(1) (Spain) 309 142 30.0 239 363 28.7
Vukile group total 1 030 393 100.0 833 795 100.0
(1) Results for Morzal are for a two month period from 1 August 2018 to 30 September 2018
(2) The property revenue and property expense have been reflected net of recoveries in terms of the Best Practice
Recommendations of the SA REIT Association. The unaudited condensed consolidated statement of profit and
loss reflects gross property revenue and gross property expenses.
The geographic contribution to group profit before taxation and fair value adjustments, including the group's share
of equity accounted profits from associates, is represented below:
30 September 2018
Operating Segment R000 %
Vukile (Southern Africa) 415 814 68.0
Atlantic Leaf Properties Limited (UK) (Atlantic Leaf) share of profits 46 482 7.6
Castellana and Morzal (Spain) 149 157 24.4
Vukile Group profit before taxation and fair value adjustments 611 453 100.0
Key financial indicators
A summary of the group's key financial indicators at reporting date is shown below:
30 September 30 September 31 March
2018 2017 2018
Net asset value per share (cents) 2 027 1 917 2 010
Dividend per share (cents) 78.10 72.65 168.82
Loan to value ratio (%)(1) 41.3 30.5 32.9
Loan to value ratio net of available cash (%) 39.7 28.8 28.2
Gearing ratio (%)(2) 38.0 28.9 29.6
(1) Interest-bearing debt which includes R77.0 million commercial paper issued to a Namibian subsidiary
(eliminated on consolidation), is divided by the directors' valuation of the group's property portfolio at
30 September 2018, plus equity investments.
(2) Gearing is calculated by dividing total group interest-bearing borrowings by group total assets, per the
group's unaudited condensed consolidated statement of financial position at 30 September 2018. Interest
bearing borrowings are reduced by the group's unamortised portion of capitalised borrowing costs, calculated
in terms of International Financial Reporting Standards (IFRS) of R237.2 million (comprising R17.7 million on
ZAR debt and EUR14.5 million on Castellana EUR debt, converted to ZAR at 30 September closing spot rates
where applicable.)
A reconciliation of distributable earnings for the period to 30 September 2018 is set out under the segmental
report below.
Equity and equity issuances
During the 12 months ended 30 September 2018, 359 million Vukile shares were traded, which equates to approximately
30 million shares per month. The total value of shares traded during the 12 months ended 30 September 2018
amounted to R7.4 billion or 41.5% of the company's market capitalisation at 30 September 2018 (31 March 2018: 41%).
This demonstrates the liquidity of Vukile's shares in the market.
Equity issuances and dividend reinvestments (DRIP) during the period totalled R1.71 billion. These issuances
comprised the following:
- Vukile issued 73.9 million shares under general authority by way of an accelerated book-build on 26 July 2018 at
R18.66 per share - equating to R1.38 billion;
- 12.7 million shares were issued to Encha on 26 July 2018 at R19.60 per share, under the Encha equity approval
scheme - totalling R250 million; and
- Shares issued under an election to reinvest cash dividend in return for shares on 22 June 2018 - totalling
3.9 million shares at R20.30 - equating to R78 million.
Cash flow
The major items reflected in the composition of cash generated and utilised during the period under review are
set out below:
30 September
2018
R000
Cash flow from operating activities 912 928
Issue of shares 1 697 242
Interest bearing borrowings received 5 107 446
Equity contribution from non-controlling interest in new subsidiary 1 784 121
Acquisitions of and improvements to investment properties (9 057 728)
Dividends paid (757 729)
Issues of shares to the value of R1.7 billion, contributions from minorities of R1.8 billion, and additional
borrowings of R5.1 million were utilised to acquire investment properties of R9.1 billion in Spain during the
period under review.
Extracts from the unaudited condensed consolidated statement of profit or loss for the six months ended
30 September 2018
30 September 2018 30 September 2017
%
R000 R000 R000 R000 Variance Notes
Net profit from property operations(1) 813 543 602 864 34.9 (a)
Investment and other income 93 451 158 006 (40.9) (b)
- Dividends received 49 869 67 213 (25.8)
- Interest and other income 43 582 90 793 (52.0)
Share of income from associate (Atlantic Leaf) 46 482 34 358 35.3
Corporate and administrative expenses (96 588) (56 801) (70.0) (c)
Finance costs (246 810) (171 601) (43.8) (d)
Taxation (16 594) (8 986) (84.7) (e)
(1) Excludes straight-line rental income
(a) Net profit from property operations
The group's net profit from property operations, exclusive of straight-line rental accruals, has increased
by R210.6 million (34.9%) over the comparable period, from R602.9 million to R813.5 million. The southern
African stable portfolio reflected a pleasing like-for-like growth of c. 5.1% for the six months ended
30 September 2018. The Spanish portfolio has experienced a significant increase in the growth of net property
revenue over the comparative period due to ongoing acquisitions.
Further details of the group's property portfolio performance are shown under paragraphs 7 and 8 and in
the operating segment analysis section.
Gross rental receivables (tenant arrears)
Group tenant arrears were R102.2 million at 30 September 2018 (31 March 2018: R87.7 million). Gross rental
receivables have increased by R14.5 million over the six month period, mainly attributable to the acquisition
of Morzal which contributed R12.8 million.
Impairment allowance for tenant receivables
The allowance for the impairment of tenant receivables has increased to R47.1 million at 30 September 2018.
The explanation for the increase is represented below, including the impact of the adoption of IFRS 9.
Further details of this IFRS 9 adoption are set out in Note 1 to the unaudited condensed consolidated
financial statements at 30 September 2018.
The impairment allowance represents 2.0% of gross rental income for the 12 months ended 30 September 2018
(31 March 2018: 2.2%). A summary of the movement in the impairment allowance for trade receivables by
operating segment is set out below:
Southern
Africa Spain Total
R000 R000 R000
Impairment allowance 1 April 2018 43 710 1 230 44 940
Adjustment to retained income due to IFRS 9 adoption (4 807) - (4 807)
Foreign Currency Translation Reserve - 70 70
Allowance for receivables impairment for the six month period 4 577 2 280 6 857
Impairment allowance 30 September 2018 43 480 3 580 47 060
(b) Investment and other income
Investment and other income has reduced significantly from R158.0 million (30 September 2017) to R93.5 million
at 30 September 2018. The reduction of R64.5 million is mainly attributable to the following:
Rm
Interest earned on Cross Currency Interest Rate Swaps (CCIRS) in
prior year reflected under investment income and now reflected separately* (32.3)
Additional interest earned on staff loans over prior period** 7.7
Atlantic Leaf pre-commitment fee earned in prior period (non-recurring) (9.4)
Reduced interest earned on call and money market deposits over prior
period due to acquisitions made (13.4)
Increase in dividends earned from Fairvest Property Holdings Limited
(Fairvest) over prior period 5.0
Reduced Gemgrow Properties Limited (Gemgrow) dividends over prior period due to change from quarterly
to a bi-annual dividend cycle and which will normalise over the full reporting period (22.4)
Other 0.3
Total variance to prior period (64.5)
* Current period interest on CCIRS reflected separately in the condensed statement of profit or loss equates
to c. R74.3 million
** The cost to Vukile of financing these loans was R8 million for the period ended 30 September 2018
(c) Corporate and administrative expenses
Group corporate administrative expenditure of R96.6 million is R39.8 million (70.0%) higher than the previous
period's expenditure of R56.8 million. The majority of this increase is due to the employment of an experienced
property team in Spain, who have been in place for the six month period ended 30 September 2018. The staff
complement employed in Spain has increased from four employees at 30 September 2017 to 21 at 30 September 2018,
to cater for the significant expansion in investment properties. The table below shows the geographic split
of expenditure by segment, and the primary categories contributing to the increase on a like for like basis
compared to prior periods.
30 September 2018 30 September 2017
R000 % R000 %
Southern Africa 67 987 100.0 54 666 100.0
Salary and related costs 48 506 71.3 37 986 69.5
Directors fees 2 365 3.5 1 307 2.4
Professional, regulatory, valuation and legal fees 3 869 5.7 3 226 5.9
Premises, property, plant and equipment 5 662 8.3 5 182 9.5
Audit fees 1 944 2.9 1 679 3.0
Consulting fees 1 676 2.5 1 464 2.7
General operating costs 3 609 5.3 3 338 6.1
Loss on foreign exchange transactions 356 0.5 484 0.9
Spain 28 601 100.0 2 135 100.0
Salary and related costs 16 725 58.5 609 28.5
Directors fees 566 2.0 - 0.0
Professional, regulatory, valuation and legal fees 6 303 22.0 1 277 59.8
Premises, property, plant and equipment 890 3.1 - 0.0
Audit fees 1 108 3.9 - 0.0
Consulting fees 402 1.4 - 0.0
General operating costs 2 607 9.1 249 11.7
Vukile has increased its staff complement mainly in finance and asset management which has led to an increase
in remuneration costs.
(d) Finance costs
Group finance costs have increased by R75.2 million from R171.6 million to R246.8 million. The increase in
finance costs is primarily due to additional finance costs incurred in the financing of the acquisition of five
shopping centres in Spain during the past six months. A comparison of the group's cost of funding is split by
currency in the table below:
30 September 30 September
2018 2017
% %
ZAR 9.08 9.27
GBP 3.47 3.10
EUR 2.85 2.12
Vukile's weighted average historical cost of finance equates to c. 4.74%, with 94.2% of interest-bearing
term debt hedged.
(e) Taxation
The first six month's tax accrual of R16.6 million is higher than the comparable period of R9.0 million,
primarily as a result of additional taxation arising in Castellana of R4.5 million, compared to the prior period.
4. LISTED INVESTMENTS
Fairvest
Vukile held a 27.3% shareholding in Fairvest at 30 September 2018 (31 March 2018: 31.4%).
Vukile's investment in Fairvest is valued at R622.0 million at 30 September 2018, based on R2.30 per share
(31 March 2018: R2.20 per share).
Dividends received during the six months ended 30 September 2018 amount to R13.8 million of which 50% is related to
the year ended 31 March 2018. Based on the public guidance provided by Fairvest management, it is anticipated that
dividends of c.R58.0 million will be received or accrued for the period ending 31 March 2019.
Gemgrow
Vukile holds 4.7 million and 114.4 million Gemgrow "A" and "B" shares respectively, equating to 26.3% of total shares
in issue.
These shares are valued at R771.0 million at 30 September 2018 based on the market prices of R9.35 and R6.35
(31 March 2018: R9.79 and R6.50) for the A and B shares respectively.
Vukile has received dividends during the period amounting to R23.4 million, which related to the period ended
31 March 2018. Dividends of R91.6 million are budgeted to be received and accrued for the period ending
31 March 2019 in terms of public guidance issued by Gemgrow management.
Investment in associate
Atlantic Leaf - 34.9%
Vukile held a 34.9% shareholding in Atlantic Leaf at 30 September 2018 (31 March 2018: 34.9%). Vukile currently holds
66.0 million shares in Atlantic Leaf.
In terms of IFRS, Atlantic Leaf is regarded as an associate of Vukile. As such, all dividends received reduce the
carrying value of the investment in Atlantic Leaf, which amounted to R1.3 billion at 30 September 2018.
However, as dividends receivable for the six month period to 30 September 2018 of R56.0 million are represented by
cash, these dividends are regarded as distributable.
Based on the guidance contained in the prospects statement issued by Atlantic Leaf in October 2018, dividends,
inclusive of forward exchange contracts (FECs), of R112.0 million are anticipated to be received and accrued by
Vukile for the period ending 31 March 2019.
The share of profits earned by Atlantic Leaf for the six month period to 30 September 2018 amounts to R46.5 million
as determined under IFRS.
Investment in subsidiaries
Castellana - 97.5% and Morzal - 50.9%
During the six month period Castellana acquired the Habaneras shopping centre for EUR83.8 million together with
transaction costs. The acquisition was funded via an equity injection of EUR42.7 million and a loan from Aareal Bank.
Castellana's total property portfolio was valued at EUR406.3 million at 30 September 2018.
The Castellana portfolio is well diversified across Spain (none of the properties are situated in Catalonia) and
comprises high-quality retail parks and shopping centres with solid long-term trading histories. The low-average
base rentals provide room for income growth going forward.
Vukile anticipates dividends of EUR6.4 million from Castellana for the six month period ended 30 September 2018.
Vukile announced on 31 July 2018 that its subsidiary, Morzal, had acquired four high-quality shopping centres in
Spain at a cost of EUR480.6 million (including acquisition costs), at an attractive pre-gearing yield of 5.7%.
EUR256.0 million of the acquisition was funded through a bank loan and the remainder through equity, which included
two external investors who contributed EUR115.0 million.
Morzal's total property portfolio was valued at EUR494.0 million at 30 September 2018.
Vukile's 50.9% shareholding in Morzal is expected to generate a dividend of EUR1.1 million for the two-month period to
30 September 2018 based on dividends calculated under Spanish GAAP. The dividends for the second period will be
increased to adjust for the depreciation of the four properties under Spanish GAAP to better match the IFRS earnings
generated by Morzal.
Post a share swap on 27 November 2018, Morzal has become a 100% subsidiary of Castellana and Vukile's shareholding
in Castellana has reduced from 97.5% to 72.6%.
30 September 2018 31 March 2018
Cash dividends (net of withholding taxes of 2.66%) EUR7.5 million EUR10.4 million (1)
Investment properties EUR898 million EUR308 million
Interest-bearing debt(2) EUR444 million EUR146 million
Loan to value ratio 49.4% 47.4%
Loan to value ratio net of cash 47.2% 42.2%
(1) Declared and paid to Vukile in May 2018 for year ended 31 December 2017
(2) Interest bearing borrowings are reduced by Castellana's and Morzal's unamortised portion of capitalised
borrowing costs, calculated in terms of IFRS of EUR14.5 million at 30 September 2018
It should be noted that under Spanish law, Castellana and its subsidiaries are required to utilise Spanish GAAP
in the preparation of their individual annual financial statements and also requires Castellana's consolidated
annual financial statements to be prepared under IFRS. These consolidated IFRS financial statements have been
used in the Vukile group's consolidation, in terms of the basis of preparation as set out in note 10.
5. GROUP BORROWINGS
The group's finance strategy is to optimise funding costs and minimise refinance risk. Total debt as at 30 September
2018 amounted to R13,2 billion. A detailed breakdown is provided below:
Rm
Foreign Spanish Secured against Castellana and Morzal's investment
funders (EUR) 7 290 properties with no recourse to Vukile.
Local funders (EUR) 2 160 Secured against a major
Local funders (GBP) 528 portion of Vukile's
Local funders (ZAR) 1 338 southern Africa
DMTN (ZAR) 1 884 balance sheet
13 200
Vukile's funding of R13.2 billion (including R77.0 million commercial paper issued by Vukile to its Namibian
subsidiaries, which is eliminated on consolidation, reducing group debt to R13.1 million), is well diversified
across a number of funders, in line with its strategy of reducing refinancing risk.
Sources of funding
Debt
exposure
Debt per bank
R000 %
Aareal 4 894 670 37.1
Absa 1 703 413 12.9
Banco Popular 184 923 1.4
Banco Santander 963 560 7.3
Caixabank 1 246 924 9.5
DMTN - Corporate bonds 1 707 000 12.9
DMTN - Commercial paper 177 000 1.3
Investec 828 584 6.3
Nedbank 100 000 0.8
RMB 610 843 4.6
Standard Bank 783 463 5.9
Grand total 13 200 380 100.0
Vukile group loan and hedging (swap and fixed term debt) expiry profile at 30 September 2018
2019 2020 2021 2022 2023 2024 2025 2026 Total
Loan expiry profile (Rm) 356 1 116 1 402 2 133 1 313 1 430 - 4 895 12 645
Commercial Paper and
Access Facility
expiry profile (Rm) 177 339 39 - - - - - 555
Hedging (Swap & Fixed
debt) profile (Rm) 245 519 1 050 2 253 1 271 1 655 25 4 895 11 913
Loan expiry profile (%) 2.7 8.5 10.6 16.2 9.9 10.8 - 37.1 95.8
Commercial Paper and
Access Facility
expiry profile (%) 1.3 2.6 0.3 - - - - - 4.2
Hedging (Swap and
Fixed debt) profile (%) 2.1 4.4 8.8 18.9 10.6 13.9 0.2 41.1 100.0
EUR42.3 million of debt with Aareal related to Habaneras is fixed. EUR256.0 million of debt with Aareal, related to
Morzal, is initially floating for three months and will be fixed for five years on 14 December 2018, in terms
of the loan agreement with Aareal Bank and has therefore been included in the interest bearing debt hedged
ratio and fixed rate maturity profile.
The strategy of the group is to ensure that no more than 25% of debt expires in any one year. More than 25%
of debt will mature in FY2026. Aareal provided funding of EUR42.3 million for the Habaneras acquisition and
EUR256.0 million for the Morzal acquisition. The intention is that as this debt reaches maturity, Castellana's
overall debt will have increased and as a percentage this debt will be less than 25% of total debt at that
point in time. It should also be noted that Aareal intends to syndicate up to 50% of the EUR256.0 million loan
which will reduce Vukile's exposure to Aareal. As can be observed from the above expiry profile, there is a
low refinance risk over the next five years.
A summary of group debt ratios at 30 September 2018 is provided below:
Southern
Group Africa Spain
R000 R000 EUR000
Total debt (excluding access facilities and commercial paper) 12 645 584 5 355 506 444 330
Interest-bearing debt hedged (%) 94.2 86.3 100.0
Debt maturity profile (years) 4.3 2.2 6.0
Hedging (swap and fixed debt) - maturity profile (years) 4.7 2.8 6.0
Directors' valuation loan-to-value (LTV) ratio (net of cash)(1) (%) 39.7 33.4 47.2
Gearing ratio(2) (%) 38.0 31.5 45.8
Interest cover ratio (times)(3) 2.88 2.89 2.85
(1) Directors' Valuation LTV ratio (net of cash) calculated as a ratio of actual interest-bearing debt
owing less cash and cash equivalents (excluding tenant deposits & restricted cash) divided by the sum of
(i) the amount of the Director's Valuation of all the Properties in the Vukile Group Property Portfolio
at 30 September 2018, on a consolidated basis and (ii) the market value of equity investments.
(2) Gearing is calculated by dividing total group interest-bearing borrowings by group total assets, per the
group's unaudited condensed consolidated statement of financial position at 30 September 2018. Interest
bearing borrowings are reduced by the group's unamortised portion of capitalised borrowing costs, calculated
in terms of IFRS of R237.2 million (comprising R17.7 million on ZAR debt and EUR14.5 million on Castellana
EUR debt, converted to ZAR at 30 September closing spot rates where applicable.)
(3) Calculated for the six month period ended 30 September 2018.
Undrawn facilities at 30 September 2018
Undrawn facilities amount to c.R1.46 billion and are detailed as follows:
Facility Facility Facility
amount drawn undrawn
R000 R000 R000
ABSA revolving credit facility (RCF) 850 000 300 733 549 267
Investec Access Facility 100 000 38 083 61 917
Investec RCF (ZAR) 100 000 - 100 000
Investec Term Loan (EUR) 388 770 246 104 142 667
RMB Access Facility 200 000 38 980 161 020
Standard Bank Access Facility 80 000 - 80 000
Standard Bank Term Loan (EUR) 360 952 - 360 952
Grand total 2 079 722 623 900 1 455 823
Total DMTN Commercial paper issued for R117 million is fully backed by undrawn facilities.
Ratings
GCR upgraded Vukile's corporate long-term credit rating to A+(ZA) with the outlook accorded as stable, and
reaffirmed Vukile's corporate short-term rating of A1(ZA) and secured long-term credit rating of AA+(ZA).
Group debt movement during the six months ended 30 September 2018
During the six month period ended 30 September 2018:
- c. R256 million of Bank debt was repaid;
- c. R88.5 million of Access Facilities were utilised primarily for South African development or expansion
projects;
- Corporate bonds of R690 million were repaid during the six month period;
- R825 million of new Corporate bonds were issued;
- c. EUR6 million of EUR Bank debt was entered into to acquire shares in Castellana for the Habaneras acquisition;
- Within Castellana, EUR42.3 million of fixed Bank debt was entered into for the Habaneras acquisition - this debt
is non-recourse to Vukile;
- A large percentage of the proceeds of the Vukile equity book-build issuance of c. R1.6 billion was utilised
together with R400 million of ZAR Bank debt and EUR15 million of EUR Bank debt to acquire shares in Morzal;
- Within Morzal, EUR256 million of Bank debt (which is to be fixed on 14 December 2018) was concluded - this
debt is non-recourse to Vukile;
- Vukile extended ZAR Interest Rate Swaps totalling c. R961.3 million, at an estimated new annualised
additional cost of R1.5 million.
The group has complied with all the bank's group LTV covenants of 50%. The group has also complied with the
DMTN's LTV covenant of 45% in respect of those properties mortgaged as security under the DMTN programme.
Group foreign exchange currency hedges at 30 September 2018
Vukile has adopted a strategy of hedging its foreign dividend exposure at c.75% over a three to five-year period
in line with anticipated dates of dividend receipts.
EUR net income exposure - as at 30 September 2018
Dividend payment Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23
dates EUR000 EUR000 EUR000 EUR000 EUR00 EUR000 EUR000 EUR0 EUR000 EUR000
Net EUR
dividends forecast 4 294 6 853 6 986 7 149 7 115 7 283 8 762 8 933 10 134 10 309
Existing forward
exchange contract
(FEC) hedges on
dividends (3 209) (4 884) (5 375) (5 289) (5 495) (5 508) (4 600) (4 600) (4 600) (4 600)
Fixed FEC
EUR/ZAR rate 16.4265 17.1270 17.7734 18.4981 18.5148 19.4321 20.6629 21.5255 22.4193 23.3412
Unhedged dividend
income 1 085 1 969 1 611 1 860 1 620 1 775 4 162 4 333 5 534 5 709
Percentage EUR
income hedged over
three years 75% 71% 77% 74% 77% 76% 53% 51% 45% 45%
Average hedge (%) 75%
GBP net income exposure - as at 30 September 2018
Nov-18 May-19 Nov-19 May-20 Nov-20
Dividend payment dates £000 £000 £000 £000 £000
Net GBP dividends forecast 2 595 2 434 2 322 2 378 2 434
FEC hedges on dividends (1 981) (2 035) (1 996) (2 045) (2 070)
Fixed FEC GBP/ZAR rate 18.5923 19.2135 19.9029 20.6072 21.3622
Unhedged dividend income 614 400 326 332 364
Percentage EUR income hedged over three years 76% 84% 86% 86% 85%
Average hedge 83%
Group cost of finance at 30 September 2018
Group cost of finance for the period ended 30 September 2018 at the historic weighted average interest cost of
4.74% comprises the following:
- ZAR - 9.08%
- EUR - 2.85%.
- GBP - 3.47%.
The table below shows actual funding costs and nominal borrowing by currency between FY2018, HY2019 and a forecast
for FY2019. Historic rates are based on actual interest costs including hedging and amortised transaction costs,
divided by the average debt by month over the respective period. Forecast rates are based on assuming R160 million
of new ZAR debt utilised in December 2018 with assumptions for current debt and swaps expiring during the
forecast period.
FY2019 HY2019 FY2018 Debt Debt
12 month Historic Historic as at as at
forecast cost of cost of 30 September 31 March
of debt debt debt 2018 2018
% % % R000 R000
ZAR 9.23 9.08 9.24 3 221 796 2 854 530
EUR 2.72 2.85 2.28 9 450 145 3 740 248
GBP 3.49 3.47 3.34 528 439 476 102
Total 4.52 4.74 5.74 13 200 380 7 070 880
6. CCIRS AS A PERCENTAGE OF FOREIGN INVESTMENT EXPOSURE
CCIRS have the ability to hedge both foreign exchange fluctuations on Vukile's earnings and asset exposure.
To minimise the impact of unexpected risks at the maturity of the CCIRS, Vukile has chosen to limit the utilisation
of CCIRS to 45% of total international investments.
The CCIRS ratio to total value of international investments (on a consolidated basis) is 34.5%.
EUR Fixed ZAR Average
EUR ZAR EUR/ZAR Rate over Rate over
Nominal Nominal Initial Rate Term Term Maturity
EUR000 R000
Nedbank CCIRS June 2018 93 200 1 346 240 14.4446 1.90% 8.81% 14-06-2021
Nedbank CCIRS June 2018 23 800 360 380 15.1420 1.29% 8.81% 14-06-2021
ABSA CCIRS July 2018 40 000 629 860 15.7465 3.70% 11.88% 13-06-2022
Investec CCIRS July 2018 25 500 401 370 15.7400 3.72% 11.88% 13-06-2022
Total 182 500 2 737 850
Vukile's foreign exchange rate hedging policy's intention is to reduce the impact of foreign currency fluctuations,
and not to necessarily profit from ZAR weakness, however investors may expect Vukile's foreign investments to
provide some "Rand Hedge" which is currently the case from both an earnings perspective where 25% of foreign
earnings are hedged.
7. SOUTHERN AFRICA
7.1 SOUTHERN AFRICAN PROPERTY PORTFOLIO OVERVIEW
The southern Africa property portfolio at 30 September 2018 consisted of 60 properties with a total market value
of R14.5 billion excluding capitalised lease commissions, and gross lettable area (GLA) of 939 123m2, with an
average value of R242 million per property. The southern African retail portfolio which accounts for c.91.0%
of the value of the assets, was valued at R13.3 billion and consists of 45 properties with an average value
of R295 million.
The geographical and sectoral distribution of the group's southern African property portfolio is indicated
in the tables below. The portfolio is well-represented in most of the South African provinces and Namibia.
Some 75.0% of the gross income is derived from Gauteng, KwaZulu-Natal, Western Cape and Namibia.
Geographic profile
Total portfolio
% of gross income %
Gauteng 36
KwaZulu-Natal 23
Namibia 8
Western Cape 8
Limpopo 7
Free State 6
North West 5
Mpumalanga 4
Eastern Cape 3
Based on market value, 91% of the southern African portfolio is in the retail sector followed by 3% in
offices, 3% in industrial, 2% in motor-related and 1% in the residential sectors.
The tenant profile is listed in the table below:
Tenant profile
Total portfolio
% of Total GLA %
Large national and listed tenants and major franchises 67
National and listed tenants, franchised and medium to large professional firms 10
Other 23
The retail portfolio's exposure to national, listed and franchised tenants is 82% in total.
Vukile's tenant concentration risk is considered to be low as the top 10 tenants account for 47% of total GLA.
Shoprite is the single largest tenant, occupying 8.5% of total GLA with Pick n Pay the second largest at 7%
of total GLA.
The top 15 properties, all of which are retail assets, have 82% exposure to national, listed and franchised
tenants and represent 58.2% of the total portfolio value and 47% of the total portfolio GLA.
Top 15 properties by value
Directors'
valuation at
30 September %
GLA 2018 of Valuation
Property Location m2 Rm total R/m2
Boksburg East Rand Mall* Gauteng 34 064 1 396.6 9.6 40 999
Durban Phoenix Plaza KwaZulu-Natal 24 351 925.9 6.4 38 023
Pinetown Pine Crest KwaZulu-Natal 40 086 897.4 6.2 22 387
Gugulethu Square Western Cape 25 322 572.0 3.9 22 589
Soweto Dobsonville Mall Gauteng 26 628 556.3 3.8 20 892
Queenstown Nonesi Mall Eastern Cape 27 898 478.0 3.3 17 134
Oshakati Shopping Centre Namibia 24 632 432.6 3.0 17 563
Daveyton Shopping Centre Gauteng 17 774 420.6 2.9 23 664
Germiston Meadowdale Mall** Gauteng 33 046 414.4 2.9 12 540
Bloemfontein Plaza Free State 43 771 412.8 2.8 9 431
Phuthaditjhaba Maluti Crescent Free State 21 680 408.8 2.8 18 856
Randburg Square Gauteng 40 767 406.7 2.8 9 976
Thohoyandou Thavhani Mall*** Limpopo 17 602 406.1 2.8 23 071
Moruleng Mall# North West 25 137 370.3 2.6 14 731
Roodepoort Hillfox Power Centre Gauteng 38 245 341.4 2.4 8 927
Total top 15 441 003 8 439.9 58.2 19 138
* Represents an undivided 50% share in this property.
** Represents an undivided 67% share in this property.
*** Represents an undivided 33% share in this property.
# Represents 80% share in the company.
7.2 SOUTHERN AFRICAN PROPERTY PORTFOLIO VALUATIONS
The accounting policies of the group require that the directors value the entire portfolio every six months
at fair market value. Approximately one-half of the portfolio is valued every six months, on a rotational
basis, by registered independent third-party valuers. The directors have valued the southern African
property portfolio at R14.5 billion as at 30 September 2018(1). This is R22.4 million, or 0.2% higher
than the valuation as at 31 March 2018. The calculated recurring forward yield for the portfolio is a
conservative 8.4%.
The external valuations by Quadrant Properties (Pty) Ltd and Knight Frank (Pty) Ltd at 30 September 2018
of 52% of the total portfolio are in line with the directors' valuations of the same properties.
(1) The group's property portfolio value takes into account Moruleng Mall at 80%, whereas in the financial
statements the group property value reflects 100% of Clidet, the entity which owns Moruleng Mall.
7.3 SOUTHERN AFRICAN PROPERTY PORTFOLIO PERFORMANCE
The financial performance of the stable portfolio is set out below:
September September
Financial performance for the stable portfolio 2018 2017 %
(excluding acquisitions and sales) Rm Rm change
Property revenue 681.0 647.2 5.2
Net property expenses (113.3) (106.9) (6.0)
Net property income 567.7 540.3 5.1
Property expense ratios (%)* 16.6 16.5 0.6
* Recurring cost to property revenue ratios (including rates and taxes and electricity costs; excluding
asset management fee).
New leases and renewals in excess of 119 000m2 with a contract value of R878 million were concluded year
to date keeping tenant retention at 82%.
Details of large contracts concluded
Contract Lease
value duration
Tenant Property Sector Rm Years
Pick n Pay Pinetown Pine Crest Retail 77.7 10
Cashbuild Phuthaditjhaba Maluti Crescent Retail 31.8 10
Shoprite Checkers Durban Phoenix Plaza Retail 25.6 5
Shoprite Checkers Mbombela Shoprite Centre Retail 24.0 5
Truworths Boksburg East Rand Mall (50%) Retail 22.9 5
Shoprite Checkers Tzaneen Maake Plaza (70%) Retail 19.8 5
Spar Ulundi King Senzangakona Shopping Centre Retail 14.1 5
The Hub Durban Phoenix Plaza Retail 13.3 5
Spar Hammanskraal Renbro Shopping Centre Retail 13.0 5
Group lease expiry
The group lease expiry table reflects that 15% of the leases are due for renewal in the second half
of the year. Approximately 49% of leases are due to expire in 2022 and beyond (up from 38%).
Beyond
March March March March March
% of contractual rent 2019 2020 2021 2022 2022
Rent 15 19 17 15 34
Cumulative as at September 2018 15 34 51 66 100
Cumulative as at March 2018 29 47 62 73 100
Beyond
March March March March March
% of GLA Vacant 2019 2020 2021 2022 2022
GLA 4.3 14 15 13 12 42
Cumulative as at September 2018 4.3 18 33 46 58 100
Cumulative as at March 2018 4.2 31 46 59 68 100
Vacancies
At 30 September 2018, the portfolio's vacancy (measured as a percentage of gross rental) was 3.9% compared
to 3.7% at 31 March 2018 and the portfolio's vacancy (measured as a percentage of GLA) was 4.3% compared
to 4.2% at 31 March 2018. The retail portfolio vacancy based on gross rental is unchanged at 3.4%
(31 March 2018: 3.4%)
September March
Vacancies (% of gross rental) 2018 2018
Retail 3.4 3.4
Industrial 2.1 6.0
Offices 19.5 10.3
Motor Related 0.0 0.0
Portfolio vacancy 3.9 3.7
Office vacancies increased due to a tenant vacating 3721m2 at Sandton Sunninghill Sunhill Park. We are
currently evaluating various options to convert the property. This vacancy will be moved to development
vacancy in future.
The vacancy per sector (measured as a percentage of gross lettable area) is indicated in the table below.
September March
Vacancies (% of GLA) 2018 2018
Retail 3.7 3.9
Industrial 1.6 3.5
Offices 22.0 13.5
Motor Related 0.0 0.0
Portfolio Vacancy 4.3 4.2
GLA summary GLA m2
Balance at 31 March 2018 937 463
GLA adjustments 1 660
Disposals 0
Acquisitions and extensions 0
Balance at 30 September 2018 939 123
Vacancy summary Area m2 %
Balance at 31 March 2018 39 681 4.2
Less: Properties sold since 31 March 2018 0
Remaining portfolio balance at 31 March 2018 39 681 4.2
Leases expired or terminated early 120 678
Tenants vacated 21 674
Renewal of expired leases (78 960)
Contracts to be renewed (19 652) 0.1
Development vacancy (5 547)
New letting of vacant space (37 236)
Balance at 30 September 2018 40 638 4.3
Base rentals (excluding recoveries)
The weighted average monthly base rental rates per sector, between 31 March 2018 and 30 September 2018,
are set out in the table below:
September March
Weighted average base rentals (R/m2) excluding recoveries 2018 2018 Escalation
Retail 132.66 130.44 1.8
Industrial 55.94 54.42 2.8
Offices 97.77 95.74 2.2
Motor Related 134.24 128.64 4.4
Portfolio weighted average base rentals 124.99 122.77 1.8
Average contractual rental escalations are 7.1%.
The average escalation on expiry rentals on the total portfolio of 4.1% is positive against the backdrop
of a difficult trading environment. Positive reversions of 4.3% were achieved in the retail sector.
Expense categories and ratios
The largest expense categories contribute 82% to the total expenses. These are government services (46%),
rates and taxes (18%), cleaning and security (11%) and property management fees (7%).
The group continuously evaluates methods of containing costs in the portfolio. The stable portfolio's
recurring net costs to income ratio of 17.3% is still in line with the ratio of 16.6% at 31 March 2018.
7.4 DEVELOPMENTS AND ACQUISITIONS
Upgrades/Redevelopments - R607.9 million
As part of the ongoing strategy to improve the quality of the existing portfolio, the following projects
have been completed or are in progress:
Phuthaditjhaba: Maluti Crescent
Maluti Crescent, previously known as Setsing Crescent, is located in Phuthaditjhaba in the eastern Free
State. It has a GLA of 22 000m2 and the major tenants include Spar, Game, Cashbuild, Clicks, all five
major banks and a very strong national fashion component. The centre is currently being extended and
upgraded. The total project cost has increased from R338.0 million, with a projected yield of 8.5%,
to R391.6 million (8.1%). The cost increase is mainly due to scope variations and additional maintenance
work not foreseen in the initial feasibility. The extension area is due for completion by March 2019
while the relocation of tenants in the existing mall will be completed by August 2019.
The centre is being transformed from a strip mall into an almost fully enclosed mall. The multi-level
extension includes new under cover parking and taxi ranks on the ground and mezzanine levels with
12 357m2 of new retail space on the top level. Tenants in the extension area include Pick n Pay,
Mr Price, additional Foschini Group outlets and a relocated and enlarged Woolworths. More than 90%
of the leases for the extension area have been finalised.
The existing centre is being upgraded to complement the new mall. Provision has been made for a new
PV cell solar installation on the roof of the extension.
Flanagan & Gerard, who have extensive experience in shopping centre development, are the development
managers.
Pinetown: Pine Crest Centre
Vukile acquired SA Corporate Real Estate's 50% shareholding in Pine Crest Centre in April 2017.
Pine Crest Centre is the biggest shopping centre in the Pinetown central business district with a GLA
of 40 087m2 spread over three levels. Major tenants include Pick n Pay, Game, Dischem, Virgin Active,
Woolworths, Foschini, Ackermans, Edgars Active, Truworths, Mr Price, Jet Stores, Wimpy, KFC, SA Post
Office as well as the five major banks. The centre is currently being extended and upgraded at a total
cost of R200.0 million at a projected yield of 7.4%. At the same time major maintenance work will be
done, mainly to the roof waterproofing, the escalators and the HVAC systems. The project is due to be
completed in June 2019.
The existing ground level mall is being extended into the adjacent parking deck and new GLA of about
5 000m2 as well as a new street level entrance and additional escalator access to the upper shopping
levels, are being provided.
The food court on the third level is being extended and upgraded. New tenants to this area include a
Spur restaurant and a Galaxy Bingo, while the existing food outlets, including KFC and Nando's, will
be upgraded.
Germiston Meadowdale Mall
At the beginning of 2018 Vukile partnered with the Moolman Group to invest a total of R23 million to
relocate Cashbuild into a new standalone 1 350m2 store, reconfigure their former store to accommodate
new tenants (4x4 Mega World and Crazy Pets), and undertake other essential improvements. Vukile's
two-thirds capital contribution amounted to R16.3 million at a yield of 11.5%. The brand-new Cashbuild
store reopened to the public on 8 August 2018.
The centre is currently fully let with a weighted average lease expiry (WALE) of 5.7 years on GLA and
the trading density growth higher than benchmark.
Current Vukile projects
A summary of major capex projects approved and incurred to 30 September 2018 is set out below:
Paid to Budget
30 September October 2018
Approved 2018 to March 2019
Completion R000 R000 R000
Phuthaditjhaba: Maluti Crescent 31 August 2019 391 650 140 923 141 650
Pinetown: Pine Crest Centre 30 June 2019 200 000 35 497 120 350
Germiston: Meadowdale Mall 31 July 2018 16 264 13 499 2 765
Total 607 914 189 919 264 765
Developments
No developments during the period.
Acquisitions - R470.6 million
Kolonnade Retail Park
Vukile acquired the property and letting enterprise known as Kolonnade Retail Park measuring 39 450m2 from
Sasol Pension Fund for a purchase price of R470.6 million. The acquisition is expected to be yield neutral
in the first year. The centre is conveniently situated 2.5km from the N1 Highway, on the corner of Sefako
Makgatho Drive (previously Zambesi Drive) and Enkeldoorn Avenue. Kolonnade Retail Park is a typical value
centre with big box retailers and is anchored by a 12 957m2 Pick n Pay Hyper and Liquor, a 4 592m2 Mr Price
Home & Sport and a 2 333m2 West Pack Lifestyle. The centre is fully let and has a weighted average lease
expiry of just under four years and a national tenant component of 88% of the total GLA. Kolonnade Retail
Park was transferred post half-year end in November 2018.
Property sales - Southern Africa
No properties were sold during the period.
Investment properties held for sale - R2.04 billion
The investment properties held for sale comprise the Namibian portfolio and Vukile's non-retail, commercial
and industrial portfolio. It is intended to redeploy the proceeds from the sale of these portfolios, once
concluded, into Spain.
8. SPAIN
8.1 SPANISH PROPERTY PORTFOLIO OVERVIEW
The Spanish property portfolio at 30 September 2018 consisted of 19 properties with a total market value
of EUR897.9 million, excluding capitalised lease commissions, and GLA of 318 622m2, with an average value of
EUR47.3 million per property.
The geographical and sectoral distribution of the group's property portfolio is indicated in the tables
below. Some 87% of gross income is derived from Andalucia, Extremadura, Castilla Leon and Valencia.
Geographic profile
Total
portfolio
% of gross income %
Andalucia 44
Extremadura 22
Castilla Leon 11
Valencia 10
Madrid 8
Asturias 4
Murcia 1
Based on market value, 97% of the group portfolio is in the retail sector followed by 3% in the office sector.
The tenant profile is listed in the table below:
Tenant profile
Total
portfolio
% of gross income %
Large national and international tenants 91
Local tenant 9
The tenant concentration risk is considered to be low as the top 10 tenants account for 30% of gross income.
AKI is the single largest tenant, occupying 6.1% of total GLA with Media Markt the second largest at 5.7%
of total GLA.
List of total portfolio by value
Market
value % of total Valuation
Property Province Sector GLAm2 EUR'm portfolio EUR/m2
El Faro Extremadura Shopping Centre 43 423 161.5 18.0 3 719
Bahia Sur Andalucia Shopping Centre 24 760 119.5 13.0 4 826
Los Arcos Andalucia Shopping Centre 17 906 114.3 13.0 6 383
Vallsur Castilla Leon Shopping Centre 35 211 96.4 11.0 2 738
Habaneras Valencia Shopping Centre 24 158 85.2 9.0 3 527
Centro Comercial Alameda Andalucia Retail Park 27 913 59.8 7.0 2 142
Parque Oeste de Alcorcon Madrid Retail Park 13 604 52.7 6.0 3 874
Kinepolis Retail Park Andalucia Retail park 18 508 34.1 4.0 1 842
Parque Principado Asturias Retail Park 16 396 32.8 4.0 2 000
Marismas del Polvorin Andalucia Retail Park 20 000 29.1 3.0 1 455
Edificio Alcobendas Madrid Offices 11 046 20.4 2.0 1 847
Merida Extremadura Retail Park 13 447 20.0 2.0 1 487
Villanueva Extremadura Retail Park 12 405 16.1 2.0 1 298
Kinepolis Leisure Centre Andalucia Shopping Centre 7 420 14.1 1.0 1 900
Pinatar Park Murcia Retail Park 10 637 11.5 1.0 1 081
Motril Andalucia Retail Park 5 559 8.9 1.0 1 601
Mejostilla Extremadura Retail Park 7 281 8.7 1.0 1 195
Ciudad del Transporte Valencia Retail Park 3 250 7.2 1.0 2 215
Edificio Bollullos
de la Mitacion Andalucia Offices 5 698 5.7 1.0 1 000
Total 318 622 898.0 100.0 2 818
8.2 SPANISH PROPERTY PORTFOLIO VALUATIONS
The Castellana and Morzal property portfolios comprising 19 properties, which include the two call centres
acquired in 2016, were valued by Colliers International at EUR897.9 million as at 30 September 2018.
The 11 retail parks acquired in July 2017 for EUR193.0 million have increased in value by 15.9% to
EUR223.6 million as a result of strong asset management initiatives. The Alameda and Pinatar properties
acquired in December 2017 have increased in value by 9.2% to EUR71.3 million.
The 4 properties acquired at a cost of EUR480.6 million were externally valued at EUR491.7 million at
30 September 2018, two months after the acquisition.
8.3 SPANISH PROPERTY PORTFOLIO PERFORMANCE
Details of large contracts concluded
Annual Lease
Rent duration
Tenant Property Sector EUR Years
Fransveta, S.L. Kinepolis Leisure Centre Shopping Centre 155 000 15
Masquepet, S.L.U. Motril Retail Park 79 272 15
Tiendas Espacio Casa, S.L. Villanueva Retail Park 74 304 14
Marvimundo, S.L. Habaneras Shopping Centre 97 161 10
Villanueva Pomodoro Global, S.L. Villanueva Retail Park 44 694 20
Reji Car Tuning, S.L. Kinepolis Leisure Centre Shopping Centre 68 283 10
Worten Espana Distribucion, S.L. Villanueva Retail Park 64 350 9
El Italoamericano, S.L. Kinepolis Leisure Centre Shopping Centre 35 466 15
Indaloretail, S.L. Centro Comercial Alameda Retail Park 44 400 5
Restabell Franquicias, S.L.U. Centro Comercial Alameda Retail Park 65 484 3
Expiry profile
The Spanish properties' lease expiry profile table reflects that 2%, based on rent, of the leases are due
for renewal in the 2019 financial year. Approximately 47% of leases are due to expire in 2028 and beyond.
Lease expiry
% of contractual March March March March March March March March March March Beyond
rent (Expiry date) 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2028
Rent 2% 7% 6% 5% 7% 6% 5% 3% 4% 8% 47%
Cumulative as
at September 2018 2% 9% 15% 20% 27% 33% 38% 41% 45% 53% 100%
Break profile
Castellana's lease break profile table reflects that 7%, based on rent, of the leases have break options
in the 2019 financial year.
The break profiles by expiry date and first break date are also shown by GLA below:
% of contractual rent March March March March March March March March March March Beyond
(First break date) 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2028
Rent 7% 29% 18% 9% 14% 4% 5% 1% -% 3% 10%
Cumulative as
at September 2018 7% 36% 54% 63% 77% 81% 86% 87% 87% 90% 100%
% of GLA March March March March March March March March March March Beyond
(Expiry date) Vacant 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2028
GLA 2% 1% 4% 3% 2% 3% 3% 3% 1% 3% 10% 65%
Cumulative as
at September 2018 2% 3% 7% 10% 12% 15% 18% 21% 22% 25% 35% 100%
% of GLA (First break date)
% of GLA March March March March March March March March March March Beyond
(First break date) Vacant 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2028
GLA 2% 4% 26% 16% 11% 12% 3% 6% 2% -% 4% 14%
Cumulative as
at September 2018 2% 6% 32% 48% 59% 71% 74% 80% 82% 82% 86% 100%
Vacancies
At 30 September 2018, the portfolio's vacancy (measured as a percentage of GLA) was 1.8% compared to 2.8%
at 30 September 2017.
Vacancies (% of GLA) 30 September 2018 30 September 2017
Shopping Centre 3.4 31.1
Retail Park 0.4 1.7
Offices 0.0 0.0
Portfolio vacancies 1.8 2.8
A reconciliation of GLA and vacancy movements for the six months is shown below:
GLA summary GLA m2
Balance at 31 March 2018 172 974
GLA adjustments 190
Disposals -
Acquisitions and extensions 145 458
Balance at 30 September 2018 318 622
Vacancy summary Area m2 %
Balance at 31 March 2018 4 924 2.8%
Vacancy on new acquisitions since 31 March 2018 4 579
Stable Portfolio (3 660)
Balance at 30 September 2018 5 843 1.8%
Base rentals (excluding recoveries)
The weighted average monthly base rental rates per sector are set out in the table below:
September March
Weighted average base rentals (EUR/m2) excluding recoveries 2018 2018
Shopping Centre 19.2 8.9
Retail Park 9.2 9.2
Offices 9.3 9.1
Weighted average base rentals 14.0 9.2
Contractual rental escalation's in the European market are CPI linked.
The Castellana asset management team have systematically added additional Net Operating Income (NOI) to
the portfolio through a combination of re-letting of vacant space in the portfolio (Alameda, Habaneras,
Motril), redevelopment projects (Kinepolis Leisure Centre) and value-add initiatives that increase rentals
through splitting up larger boxes into smaller spaces that command higher rental rates per m2 (Parque Oeste,
Huelva, Motril, Kinepolis Retail Park, Villanueva). The team will add EUR1.2 million of additional annualised
net operating income to the portfolio through these initiatives. This additional income will be fully
reflected for FY2020.
8.4 DEVELOPMENTS AND ACQUISITIONS
Acquisitions - Spanish retail
In May 2018, Castellana acquired the Habaneras shopping centre for EUR83.8 million. The GLA of the centre is
24 158m2, the average unexpired lease term is 6.1 years with an occupancy rate of 95.8%. The shopping centre
has a 91.9% national tenant component.
Vukile announced on 31 July 2018 that its subsidiary, Morzal, had acquired four high quality shopping centres
in Spain at a cost of EUR480.6 million (including acquisition costs), at an attractive pre-gearing yield of
5.7%. The acquisition is in line with Vukile's strategy of increasing its international exposure to
developed Europe.
The 5 shopping centres referred to above have a WALE of 5 years. The total GLA of the shopping centres is
145 458 m2 and of gross revenue is derived from leading Spanish national and international retail tenants
including Media Markt, Decathlon, Carrefour, Inditex Group, Primark, AKI and Mercadona. The average monthly
rental of EUR19.68 per m2 across the centres is at the lower end of the market rental which is between EUR15
and EUR32 per m2, which is well positioned for income growth.
Weighted Purchase
average price of the
rental property
Property Province GLA m2 per m2 EUR'm
El Faro Badajoz 43 423 16.70 157.36
Bahia Sur Cadiz 24 760 24.72 120.92
Los Arcos Seville 17 906 32.28 110.70
Vallsur Valladolid 35 211 14.71 91.61
Habaneras Alicante 24 158 17.80 83.81
Total 145 458 564.40
The weighted average rental per m2 for the total portfolio is EUR19.68.
Kinepolis
The Kinepolis redevelopment project is due to be completed in March 2019. The project is 99.5% let to strong
national food and beverage operators including Burger King and Muerde la Pasta. The project has upgraded
the finishes and increases natural light into the centre. A children's play area and outdoor plaza will be
added to the centre to improve the centre's appeal to families and take advantage of the region's favourable
weather. The centre will also be integrated with the adjacent Alameda centre to create a coherent retail
precinct. The project is set to yield 10% on a capital expenditure of EUR5.5 million and should see an
increase in value on completion of the project.
Asset management initiatives and increased letting
Additional % increase
GLA signed Annualised in base
Asset Project (m2) NOI (EUR) rentals
Parque Oeste Alcorcon Worten split box 843 43 278 6.55%
Huelva C&A split box 150 15 984 5.86%
Motril Worten split box, vacancy let 1 639 23 066 5.21%
Kinepolis LC Redevelopment 2 678 552 266 60.89%
Kinepolis RP Media Markt split box 1 230 4 998 0.82%
Villanueva Electrocasa split box 2 172 151 994 59.45%
Alameda Vacancy let 1 946 201 322 100.00%
Habaneras Vacancy let 692 208 924 100.00%
TOTAL 11 350 1 201 832
The percentage increase in base rentals for the above asset management initiatives amounts to 37.6%.
9. DECLARATION OF A CASH DIVIDEND WITH THE ELECTION TO REINVEST THE CASH DIVIDEND IN RETURN FOR VUKILE SHARES
Notice is hereby given of the declaration of a dividend amounting to 78.10251 cents per share, out of
distributable income, for the six month period ended 30 September 2018.
Shareholders will be entitled to elect (in respect of all or part of their holding) to reinvest the cash dividend
of 78.10251 cents per share, in return for shares (the dividend 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 dividend reinvestment alternative
will be posted to shareholders on Thursday, 29 November 2018.
Shareholders who have dematerialised their shares are required to notify their duly appointed Central Securities
Depository Participant (CSDP) or broker of their election in the manner and time stipulated in the custody agreement
governing the relationship between the shareholder and their CSDP or broker.
Tax implications
Vukile was granted REIT status by the JSE Limited with effect from 1 April 2013 in line with the REIT structure as
provided for in the Income Tax Act, 58 of 1962, as amended (the Income Tax Act) and section 13 of the JSE Listings
Requirements.
The REIT structure is a tax regime that allows a REIT to deduct qualifying dividends paid to investors, in
determining its taxable income.
The cash dividend of 78.10251 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:
- qualifying distributions received by resident Vukile shareholders must be included in the gross income of such
shareholders (as a non-exempt dividend in terms of section 10(1)(k)(i)(aa) of the Income Tax Act), with the
effect that the qualifying distribution is taxable as income in the hands of the Vukile shareholder. These
qualifying distributions are, however, exempt from dividends withholding tax, provided that the South African
resident shareholders provided the following forms to their CSDP or broker, as the case may be, in respect of
uncertificated shares, or the company, in respect of certificated shares:
- a declaration that the dividend is exempt from dividends tax; and
- a written undertaking to inform the CSDP, broker or the company, as the case may be, should the circumstances
affecting the exemption change or the beneficial owner cease to be the beneficial owner;
both in the form prescribed by the Commissioner for the South African Revenue Service. Shareholders are advised
to contact their CSDP, broker or the company, as the case may be, to arrange for the above mentioned documents
to be submitted prior to payment of the dividend, if such documents have not already been submitted.
- qualifying distributions received by non-resident Vukile shareholders will not be taxable as income and
instead will be treated as ordinary dividends but which are exempt in terms of the usual dividend exemptions
per section 10(1)(k) of the Income Tax Act. Qualifying distributions are subject to dividends withholding tax
at 20%, unless the rate is reduced in terms of any applicable agreement for the avoidance of double taxation
(DTA) between South Africa and the country of residence of the shareholder. Assuming dividends withholding tax
will be withheld at a rate of 20%, the net dividend amount due to non-resident shareholders is 62.48201 cents
per share. A reduced dividend withholding rate in terms of the applicable DTA may only be relied upon if the
non-resident holder has provided the following forms to their CSDP or broker, as the case may be, in respect
of uncertificated shares, or the company, in respect of certificated shares:
- a declaration that the dividend is subject to a reduced rate as a result of the application of a DTA; and
- a written undertaking to inform their CSDP, broker or the company, as the case may be, should the
circumstances affecting the reduced rate change or the beneficial owner cease to be the beneficial owner;
- both in the form prescribed by the Commissioner for the South African Revenue Service. Non-resident
holders are advised to contact their CSDP, broker or the company, as the case may be, to arrange for the
above mentioned documents to be submitted prior to payment of the dividend if such documents have not
already been submitted, if applicable.
Shareholders who are South African residents are advised that in electing to participate in the dividend
reinvestment alternative, pre-taxation funds are utilised for reinvestment purposes and that taxation will
be due on the total cash dividend amount of 78.10251 cents per share.
Shareholders are further advised that:
- the issued capital of Vukile is 898 228 624 no par value shares before any election to reinvest the cash; and
- Vukile's tax reference number is 9331/617/114/3.
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 dividend reinvestment alternative are as follows:
Salient dates and times 2018
Interim results including declaration
announcement released on SENS Thursday, 29 November
Circular and form of election posted to shareholders Thursday, 29 November
Finalisation information including the share ratio and
price per share published on SENS Monday, 10 December
Last day to trade in order to participate in the election to receive
the dividend reinvestment alternative or to receive a cash dividend (LDT) Tuesday, 18 December
Shares trade 'ex' dividend Wednesday, 19 December
Listing of maximum possible number of shares under the dividend
reinvestment alternative and trading in new shares commences Friday, 21 December
Last day to elect to receive the dividend reinvestment alternative
or to receive a cash dividend (no late forms of election will
be accepted) at 12:00 (SA time) Friday, 21 December
Record date for the election to receive the dividend reinvestment
alternative or to receive a cash dividend (record date) Friday, 21 December
Results of cash dividend and dividend reinvestment alternative published on SENS Monday, 24 December
Cash dividends paid to certificated shareholders by electronic
funds transfer on or about Monday, 24 December
Accounts credited by CSDP or broker to dematerialised shareholders
with the cash dividend payment Monday, 24 December
Share certificates posted to certificated shareholders on or about Thursday, 27 December
Accounts updated with the new shares (if applicable) by CSDP or broker
to dematerialised shareholders Thursday, 27 December
2019
Adjustment to shares listed on or about Wednesday, 2 January
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 Wednesday, 19 December 2018 and Friday,
21 December 2018, both days inclusive.
3. The above dates and times are subject to change. Any changes will be released on SENS.
Foreign shareholders
The distribution of the circular and/or accompanying documents and the right to elect shares under the dividend
reinvestment alternative in jurisdictions other than the Republic of South Africa may be restricted by law and
a failure to comply with any of these restrictions may constitute a violation of the securities laws of any such
jurisdictions. It is the responsibility of each foreign shareholder to satisfy himself as to the full observation
of the laws and regulatory requirements of the relevant foreign jurisdiction in connection with the share
reinvestment alternative. The shares have not been and will not be registered for the purposes of the election
under the securities laws of the United Kingdom, European Economic Area, Canada, United States of America, Japan
or Australia and accordingly are not being offered, sold, taken up, re-sold or delivered directly or indirectly
to recipients with registered addresses in such jurisdictions.
10. BASIS OF PREPARATION
The unaudited condensed consolidated interim financial statements have been prepared in accordance with and
containing the information required by IFRS, IAS 34 - Interim Financial Reporting, the SAICA Financial Reporting
Guides as issued by the Accounting Practices Committee and Financial Reporting Announcements as issued by the
Financial Reporting Standards Council, the JSE Listings Requirements and the relevant sections of the South
African Companies Act.
All amendments to standards applicable for Vukile's financial period beginning on 1 April 2018 have been
considered. All accounting policies applied in the preparation of these interim financial statements are
consistent with those applied by Vukile in its consolidated annual financial statements for the year ended
31 March 2018, other than the adoption of those amendments or new standards that became effective or were
early adopted in the current period. Note 1.3 to the financial statements explains these changes in further
detail.
Preparation of the unaudited condensed consolidated interim financial statements was supervised by
Michael Potts CA(SA) in his capacity as financial director. These unaudited condensed consolidated interim
financial statements have not been reviewed by Vukile's independent external auditors.
11. POST-PERIOD EVENTS
Dividend
Declaration of dividend
In line with IAS 10 - Events after the Reporting Period, the declaration of the dividend of 78.10251 cents per
share in respect of the six month period ended 30 September 2018 amounting to R701.5 million occurred after the
reporting period, resulting in a non-adjusting event that is not recognised in the financial statements.
Acquisition of immovable property
Pretoria Kolonnade Retail Park
After the reporting period, Vukile entered into an agreement to acquire the Pretoria Kolonnade Retail Park in
Montana Park, Pretoria. The effective date of the transaction was 1 November 2018, with a total purchase price
of R470.6 million.
Board changes
Mr AD Botha resigned as independent non-executive director and chairman of the board at the annual general
meeting of the company held on 14 August 2018. The company thanks Mr Botha for his invaluable contribution,
wisdom and guidance during his time as chairman of the board since the company's listing in 2004.
Further to the SENS dated 3 September 2018, shareholders are advised that Mr E Bosch has resigned from Vukile
and that the current financial director, Mr MJ Potts, has withdrawn his intention to retire by 31 March 2019,
and will continue to occupy the role of financial director until further notice.
12. PROSPECTS
With the South African market continuing to be beset by macroeconomic challenges, Vukile is expected to continue
benefiting from the defensive nature of its local retail portfolio as well as the geographic diversification
achieved through its increased investment in Spain as evidenced by the performance of the high quality, low risk
Castellana portfolio.
While still dependent on the local economy not worsening significantly from current levels, the full-year growth
in dividends is expected to be in line with the growth achieved in the first half of the current financial year
and is in line with the previous guidance provided.
On behalf of the board
NG Payne LG Rapp
Chairman Chief executive officer
Melrose Estate
29 November 2018
JSE sponsor: Java Capital, 6A Sandown Valley Crescent, Sandown 2146
PO Box 522606, Saxonwold, 2132
NSX sponsor: IJG Group, Windhoek, Namibia
Executive directors: LG Rapp (chief executive), MJ Potts (financial director), HC Lopion (managing director:
southern Africa), GS Moseneke
Non-executive directors: NG Payne (chairman), PS Moyanga, SF Booysen, RD Mokate, H Ntene, HM Serebro,
B Ngonyama
Registered office: Ground floor, One-on-Ninth, Cnr Glenhove Road and Ninth Street, Melrose Estate, 2196
Company secretary: J Neethling
Transfer secretaries: Link Market Services South Africa (Pty) Ltd,19 Ameshoff Street, Braamfontein, Johannesburg
Investor and media relations: Instinctif Partners, The Firs, 3rd Floor, cnr Cradock and Biermann Road, Rosebank,
2196, Johannesburg, South Africa, Telephone +27 11 447 3030
Marketing Concepts, 1st Floor, Wierda Court, 107 Johan Avenue, Wierda Valley, Sandton, Johannesburg, 2196,
Telephone +27 11 783 0700, Fax +27 11 783 3702
www.vukile.co.za
Unaudited condensed consolidated statement of financial position
at 30 September 2018
Unaudited Unaudited Audited
September 30 September 31 March
2018 2017 2018
GROUP R000 R000 R000
ASSETS
Non-current assets 30 752 813 19 663 689 22 028 749
Investment properties 27 295 764 16 435 657 18 821 251
Investment properties 27 372 502 16 607 207 19 102 209
Investment properties under development 208 859 150 598 54 476
27 581 361 16 757 805 19 156 685
Straight-line rental income adjustment (285 597) (322 148) (335 434)
Other non-current assets 3 457 049 3 228 032 3 207 498
Straight-line rental income asset 285 597 322 148 335 434
Equity investments at fair value through profit and loss 1 392 924 1 357 556 1 384 645
Investment in associate 1 326 700 1 290 589 1 199 292
Goodwill 44 006 64 797 63 288
Furniture, fittings, computer equipment and other intangible assets 11 080 13 240 12 054
Executive share scheme financial asset 40 204 42 785 34 099
Derivative financial instruments 8 168 - 26 039
Long-term loans granted 237 452 109 360 103 672
Deferred taxation assets 110 918 27 557 48 975
Current assets 1 045 906 684 712 1 287 893
Trade and other receivables 218 900 240 931 186 743
Derivative financial instruments 2 145 489 -
Current taxation assets 10 946 2 7 290
Cash and cash equivalents 813 915 443 290 1 093 860
Non-current assets held for sale 2 057 190 1 189 508 10 500
Total assets 33 855 909 21 537 909 23 327 142
EQUITY AND RESERVES
Equity attributable to owners of the parent 17 746 450 14 534 204 15 770 080
Non-controlling interest 2 151 646 82 672 81 311
Non-current liabilities 12 258 339 5 264 179 5 484 980
Borrowings 11 863 455 5 023 096 5 346 371
Derivative financial instruments 387 288 231 896 131 304
Deferred taxation liabilities 7 596 9 187 7 305
Current liabilities 1 699 474 1 656 854 1 990 771
Trade and other payables 681 266 539 825 428 733
Borrowings 1 004 969 1 112 475 1 554 359
Derivative financial instruments 5 876 - 175
Current taxation liabilities 7 363 4 554 7 504
Total equity and liabilities 33 855 909 21 537 909 23 327 142
Net asset value (cents per share)(1) 2 027 1 917 2 010
(1) Excluding non-controlling interest.
Unaudited condensed consolidated statement of profit and loss and other comprehensive income
for the six months ended 30 September 2018
Unaudited Unaudited Audited
30 September 30 September 31 March
2018 2017 2018
GROUP R000 R000 R000
Property revenue 1 239 518 942 840 2 014 966
Straight-line rental income accrual 20 252 4 947 5 401
Gross property revenue 1 259 770 947 787 2 020 367
Property expenses (425 975) (339 976) (705 891)
Net profit from property operations 833 795 607 811 1 314 476
Corporate and administrative expenses (96 588) (56 801) (127 474)
Investment and other income 93 451 158 006 323 255
Ineffectiveness on cross-currency interest rate swaps (32 447) - -
Net interest from cross-currency interest rate swaps 74 334 - -
Operating profit before finance costs 872 545 709 016 1 510 257
Finance costs (246 810) (171 601) (367 808)
Profit before capital items 625 735 537 415 1 142 449
Profit on sale of investment properties - 4 134 13 405
Profit/(loss) on sale of furniture and equipment (3) 43 144
Fair value (loss)/gain on listed property securities 8 279 (37 740) (16 411)
Fair value movement of derivative financial instruments - (3 961) 7 408
Cost of terminating derivative financial instruments - - (3 250)
Executive share scheme financial assets - current period loss (16 563) - -
Foreign exchange (loss)/profit (51 136) (103 054) 59 936
Other capital items - (248) -
Loss on sale of listed property securities - - (26 240)
Fair value gain/(loss) on net settled derivative (1 341) - -
Profit before fair value adjustments 564 971 396 589 1 177 441
Fair value adjustments 369 052 558 501 1 149 988
Gross change in fair value of investment properties 389 304 563 448 1 155 389
Straight-line rental income adjustment (20 252) (4 947) (5 401)
Profit before equity-accounted investment 934 023 955 090 2 327 429
Profit share of associate 46 482 34 358 95 485
Profit before taxation 980 505 989 448 2 422 914
Taxation (16 594) (8 986) (10 668)
Profit for the period 963 911 980 462 2 412 246
Profit attributable to:
Owners of the parent 833 095 975 787 2 401 943
Non-controlling interests 130 816 4 675 10 303
Other comprehensive income/(loss) net of tax:
Items that will be reclassified subsequently to profit or loss:
Currency gain/(loss) on translation of investment in
foreign entities 222 681 231 200 (69 326)
Currency gain/(loss) on translation of associate 116 294
Currency gain/(loss) on translation of subsidiaries 106 387
Currency gain/(loss) on translation of goodwill 1 897 - 279
Cash flow hedges 52 452 (26 850) (60 202)
Available for sale financial assets - current period loss - (8 924) (17 610)
Other comprehensive income/(loss) for the period 277 030 195 426 (146 859)
Total comprehensive income for the period 1 240 941 1 175 888 2 265 387
Total comprehensive income attributable to:
Owners of the parent 1 000 592 1 168 882 2 254 319
Non-controlling interest 240 349 7 006 11 068
Basic and diluted earnings per share (cents) 102 137 321
Number of shares in issue 875 339 319 758 041 475 784 766 367
Vukile has no dilutionary shares in issue
Unaudited reconciliation of earnings to headline earnings
for the six months ended 30 September 2018
Unaudited Unaudited Audited
30 September 2018 30 September 2017 31 March 2018
Group Cents Group Cents Group Cents
R000 per share R000 per share R000 per share
Attributable profit to
owners of the parent 833 095 101.77 975 787 136.72 2 401 943 320.65
Earnings per share 833 095 101.77 975 787 136.72 2 401 943 320.65
Change in fair value
of investment properties
(net of allocation to
non-controlling interest) (283 651) (34.65) (560 427) (78.52) (1 148 906) (153.37)
Profit on sale of
investment properties - - (4 134) (0.58) (13 405) (1.79)
Profit/loss on sale of
furniture, fittings, computer
equipment and other 3 - (43) (0.01) (144) (0.02)
Remeasurement included in
equity-accounted earnings
of associate (9 305) (1.14) - - (10 267) (1.37)
Headline earnings
per shares 540 142 65.98 411 183 57.61 1 229 221 164.10
Weighted average
number of shares in issue 643 584 713 695 323 749 084 702
Headline and diluted
headline earnings per share 65.98 57.61 164.10
Unaudited condensed consolidated statement of cash flow
for the six months ended 30 September 2018
Unaudited Unaudited Audited
30 September 30 September 31 March
2018 2017 2018
GROUP R000 R000 R000
Cash flow from operating activities 912 928 571 156 1 333 611
Cash flow from investing activities (6 914 925) (2 282 336) (4 599 117)
Cash flow from financing activities 5 723 788 814 895 3 031 306
Net decrease in cash and cash equivalents (278 209) (896 285) (234 200)
Foreign currency movements in cash (1 736) 9 630 (1 885)
Cash and cash equivalents at the beginning of the period 1 093 860 1 329 945 1 329 945
Cash and cash equivalents at the end of the period 813 915 443 290 1 093 860
Major items included in the above:
Cash flow from operating activities
Profit before tax 980 505 989 448 2 422 914
Adjustments (255 935) (431 826) (1 216 409)
Cash flow from investing activities
Acquisition of and improvements to investment properties (9 057 728) (566 298) (4 703 030)
Investment in associate - (417 829) (418 287)
Equity contribution from non-controlling interest in new subsidiary 1 784 121 - -
Investment in a subsidiary - (1 538 855) 13 649
Net proceeds on sale of investment properties - 19 925 175 316
Cash flow from financing activities
Issue of shares 1 697 242 1 038 004 1 556 631
Dividends paid (757 729) (627 940) (1 180 331)
Finance costs (209 349) (167 521) (352 990)
Interest-bearing borrowings advanced 5 107 446 635 911 3 094 928
Unaudited condensed consolidated statement of changes in equity
for the six months ended 30 September 2018
Other
compo- Share- Non-
Share nents of Retained holders' controlling
capital equity earnings interest interest Total
GROUP R000 R000 R000 R000 R000 R000
Balance at
30 September 2017 9 008 818 5 139 972 385 414 14 534 204 82 672 14 616 876
Issue of capital 518 627 - - 518 627 - 518 627
Dividend distribution - - (550 744) (550 744) (2 741) (553 485)
9 527 445 5 139 972 (165 330) 14 502 087 79 931 14 582 018
Profit for the period - - 1 426 156 1 426 156 5 628 1 431 784
Change in fair value
of investment properties - 591 941 (591 941) - - -
Change in fair value of
investment properties
attributable to
non-controlling interest - (3 465) 3 465 - - -
Share-based remuneration - 11 139 - 11 139 - 11 139
Deferred taxation on change
in fair value of derivatives - (2 931) - (2 931) - (2 931)
Transfer to
non-distributable reserve - 154 358 (146 021) 8 337 - 8 337
Fair value movement on cross
currency interest rate swaps - 162 784 - 162 784 - 162 784
Share issue expenses
of a subsidiary - (850) - (850) (11) (861)
Change in shareholding
of subsidiary - 4 077 - 4 077 (2 671) 1 406
Legal reserve transfer
- foreign subsidiary - 217 (217) - - -
Revaluation of investments - 21 329 (21 329) - - -
Other comprehensive loss - (340 719) - (340 719) (1 566) (342 285)
Balance at 31 March 2018 9 527 445 5 737 852 504 783 15 770 080 81 311 15 851 391
Issue of capital 1 697 242 - - 1 697 242 - 1 697 242
Dividend distribution - - (754 680) (754 680) (3 049) (757 729)
11 224 687 5 737 852 (249 897) 16 712 642 78 262 16 790 904
Adjustment from initial
application of IFRS 9: - 113 152 (88 278) 24 874 492 25 366
Lease receivables:
Impairment provision - - 4 541 4 541 266 4 807
Deferred tax on above - - (1 707) (1 707) (56) (1 763)
Executive share scheme:
change in classification - 113 152 (113 152) - - -
Borrowings: Non-substantial
loan modification - - 22 040 22 040 282 22 322
Profit for the period - - 833 095 833 095 130 816 963 911
Change in fair value of
investment properties - 389 304 (389 304) - - -
Change in fair value of
investment properties
attributable to
non-controlling interest - (105 653) 105 653 - - -
Share-based remuneration
transferred to
non-distributable reserve - (129 715) 129 715 - - -
Change in fair value of
equity investments - 8 279 (8 279) - - -
Share based remuneration - 11 382 - 11 382 - 11 382
Fair value loss on
net settled derivative - (1 341) 1 341 - - -
Ineffectiveness on
cross-currency interest
rate swaps - (32 447) 32 447 - - -
Change in ownership
recognised in equity - (3 040) - (3 040) 1 832 543 1 829 503
Other comprehensive
income net of tax
Currency gain on translation
of associate - 116 294 - 116 294 - 116 294
Currency gain/(loss)
on translation of subsidiaries - (3 204) - (3 204) 109 591 106 387
Currency gain on translation
of goodwill - 1 897 - 1 897 - 1 897
Cash flow hedges - 52 510 - 52 510 (58) 52 452
Balance at 30 September 2018 11 224 687 6 155 270 366 493 17 746 450 2 151 646 19 898 096
Summarised operating segment report
for the six months ended 30 September 2018
The group identifies and presents operating segments based on the information that is provided internally to
the executive management committee (Exco). This forum reviews the performance of its offshore investments and
investment properties held by the group, on an individual basis. Reportable segments for the six month period
ended 30 September 2018, is consistent with that reported as at 31 March 2018. Exco, the group's operating
decision-making forum, driven by its international strategy and the fact that in excess of 90% of the southern
African portfolio is Retail, has taken a decision to aggregate operating segments and disclose such reportable
segments on a geographical basis, namely:
- Southern Africa;
- United Kingdom; and
- Spain.
The results of the operating segments are reviewed regularly by Exco to assess performance and make decisions to
allocate capital to each of the segments. The measurement policies that the group uses for segment reporting under
IFRS 8 are the same as those used in its financial statements, except that the following items, inter alia, are not
included in arriving at operating profit of the operating segments:
- Corporate administrative expenditure
- Investment and other income.
Summarised operating segment report (continued)
Southern Africa Spain Group
United
Retail Other Total Kingdom Retail Other Total Total
R000 R000 R000 R000 R000 R000 R000 R000
Group income for the six
months ended 30 September 2018
Property revenue(1) 653 849 67 402 721 251 - 289 742 19 400 309 142 1 030 393
Straight-line rental income accrual 18 135 1 819 19 954 - 298 - 298 20 252
Gross property revenue 671 984 69 221 741 205 - 290 040 19 400 309 440 1 050 645
Property expenses(1) (141 774) (4 999) (146 773) - (69 712) (365) (70 077) (216 850)
Net profit from property operations 530 210 64 222 594 432 - 220 328 19 035 239 363 833 795
Corporate and administrative expenses - (67 987) - - - (28 601) (96 588)
Investment and other income 6 366 75 973 82 339 - 6 578 4 534 11 112 93 451
Ineffectiveness on cross-currency
interest rate swaps - - (32 447) - - - - (32 447)
Net cash flow from cross-currency
interest rate swaps - - 74 334 - - - - 74 334
Operating profit before finance costs - - 650 671 - - - 221 874 872 545
Finance costs (36 536) (138 899) (175 435) - (68 632) (2 743) (71 375) (246 810)
Profit before capital items - - 475 237 - 150 498 625 735
Loss on sale of furniture
and equipment - - (3) - - - - (3)
Fair value gain on listed
property securities - - 8 279 - - - - 8 279
Executive share scheme financial
assets - current period loss - - (16 563) - - - - (16 563)
Foreign exchange loss - - (51 136) - - - - (51 136)
Fair value loss on cash
settled derivative - - - - - - (1 341) (1 341)
Profit before fair value
adjustments - - 415 814 - 149 157 564 971
Fair value adjustments (38 686) (11 029) (49 715) - 412 438 6 329 418 767 369 052
Gross change in fair value
of investment properties (20 551) (9 210) (29 761) - 412 736 6 329 419 065 389 304
Straight-line rental
income adjustment (18 135) (1 819) (19 954) - (298) - (298) (20 252)
Profit before equity-accounted
investment - - 366 099 - - - 567 924 934 023
Profit share of associate - - - 46 482 - - - 46 482
Profit before taxation - - 366 099 46 482 - - 567 924 980 505
(1) The property revenue and property expense have been reflected net of recoveries in terms of the Best
Practice Recommendations of the SA REIT Association. The unaudited condensed consolidated statement of
profit and loss reflects gross property revenue and gross property expenses.
Summarised operating segment report (continued)
Southern Africa Spain Group
United
Retail Other Total Kingdom Retail Other Total Total
R000 R000 R000 R000 R000 R000 R000 R000
Group statement of financial
position at 30 September 2018
Assets
Non-current assets - - 14 636 038 1 326 700 - - 14 790 075 30 752 813
Investment properties 2 166 702 358 431 12 525 133 - 14 390 050 380 581 14 770 631 27 295 764
Investment properties 2 233 076 368 359 12 601 435 - 14 390 486 380 581 14 771 067 27 372 502
Investment properties under
development 208 859 - 208 859 - - - - 208 859
Straight-line rental
income adjustment (275 233) (9 928) (285 161) - (436) - (436) (285 597)
Other non-current assets - - 2 110 905 1 326 700 - - 19 444 3 457 049
Straight-line rental income asset 275 233 9 928 285 161 - 436 - 436 285 597
Equity investments at FVTPL - - 1 392 924 - - - - 1 392 924
Investment in associate - - - 1 326 700 - - - 1 326 700
Goodwill - - 27 039 - - - 16 967 44 006
Furniture, fittings,
computer equipment and other
intangible assets - - 9 892 - - - 1 188 11 080
Executive share scheme
financial asset - - 40 204 - - - - 40 204
Derivative financial instruments - - 8 168 - - - - 8 168
Long-term loans granted - - 237 452 - - - - 237 452
Deferred taxation assets - - 110 065 - - - 853 110 918
Current assets - - 438 905 - - - 607 001 1 045 906
Trade and other receivables - - 183 162 - - - 35 738 218 900
Derivative financial instruments - - 2 145 - - - - 2 145
Current taxation assets - - 2 046 - - - 8 900 10 946
Cash and cash equivalents - - 251 552 - - - 562 363 813 915
Investment properties
held for sale 1 036 783 1 020 407 2 057 190 - - - - 2 057 190
Total assets 33 855 909
Equity and NCI Liabilities - 19 898 096
Non-current liabilities - - 5 192 899 - - - 7 065 440 12 258 339
Borrowings - - 4 810 588 - - - 7 052 867 11 863 455
Derivative financial instruments - - 381 889 - - - 5 399 387 288
Deferred taxation liabilities - - 422 - - - 7 174 7 596
Current liabilities - - 1 330 167 - - - 369 307 1 699 474
Trade and other payables - - 314 594 - - - 366 672 681 266
Borrowings - - 1 004 969 - - - - 1 004 969
Derivative financial instruments - - 5 876 - - - - 5 876
Current taxation liabilities - - 4 728 - - - 2 635 7 363
Total equity and liabilities 33 855 909
Summarised operating segment report (continued)
United Spain Group
Southern Africa Kingdom
Retail Other Total Total Total Total
GROUP R000 R000 R000 R000 R000 R000
Group income for the six months
ended 30 September 2017
Property revenue(1) 597 495 65 440 662 935 - 65 659 728 594
Straight-line rental income accrual 1 191 139 1 330 - 3 617 4 947
598 686 65 579 664 265 - 69 276 733 541
Property expenses (net of recoveries)(1) (112 035) (8 949) (120 984) - (4 746) (125 730)
Profit from property and other operations 486 651 56 630 543 281 - 64 530 607 811
Profit from associate - - - 34 358 - 34 358
(1) The property revenue and property expense have been reflected net of recoveries
in terms of the Best Practice Recommendations of the SA REIT Association.
The unaudited condensed consolidated statement of profit and loss reflects
gross property revenue and gross property expenses.
Group statement of financial position
at 30 September 2017
Assets
Investment properties 11 770 676 1 210 891 12 981 567 - 3 604 044 16 585 611
Add: Lease commissions 19 914 1 682 21 596 - - 21 596
11 790 590 1 212 573 13 003 163 - 3 604 044 16 607 207
Goodwill 48 218 - 48 218 - 16 579 64 797
Investment properties held for sale 1 118 508 71 000 1 189 508 - - 1 189 508
12 957 316 1 283 573 14 240 889 - 3 620 623 17 861 512
Add: Excluded items -
Investment property under development 150 598 - 150 598 - - 150 598
Equity investments - - 1 357 556 - - 1 357 556
Investment in associate - - - 1 290 589 - 1 290 589
Furniture, fittings, computer equipment
and other intangible assets - - 13 066 - 174 13 240
Available-for-sale financial asset - - 42 785 - - 42 785
Derivative financial instruments - - 489 - - 489
Loans receivable - - 88 897 - 20 463 109 360
Deferred taxation assets - - 27 557 - - 27 557
Trade and other receivables - - 211 306 - 29 625 240 931
Taxation refundable - - 2 - - 2
Cash and cash equivalents - - 345 840 - 97 450 443 290
Total assets - - 16 478 985 1 290 589 3 768 335 21 537 909
Equity and liabilities
Stated capital 6 589 824 2 418 994 9 008 818 - - 9 008 818
Interest-bearing borrowings 4 488 084 27 171 4 515 255 - 1 620 316 6 135 571
11 077 908 2 446 165 13 524 073 - 1 620 316 15 144 389
Add: Excluded items
Other components of equity and
retained earnings - - 5 515 984 - 9 402 5 525 386
Non-controlling interest - - 49 765 - 32 907 82 672
Derivative financial instruments - - 231 896 - - 231 896
Deferred taxation liabilities - - 9 187 - - 9 187
Trade and other payables - - 539 825 - - 539 825
Current taxation liabilities - - 4 347 - 207 4 554
Total equity and liabilities - - 19 875 077 - 1 662 832 21 537 909
Reconciliation of distributable earnings
30 September 30 September
2018 2017 Variance
R000 R000 %
Property revenue 1 030 393 728 594 41
Property expenses (net of recoveries) (216 850) (125 730) (73)
Net profit from property operations per segmental
report excluding straight-line rental income accrual 813 543 602 864 35
Corporate administration expenses (96 588) (56 801) (70)
Net cash flow from cross-currency interest rate swaps 74 334 - >100
Investment and other income 93 451 158 006 (41)
Operating profit before finance costs 884 740 704 069 26
Finance costs (246 810) (171 601) (44)
Profit before taxation 637 930 532 468 20
Taxation (16 594) (8 986) (85)
Profit for the period 621 336 523 482 19
Dividends from associate 46 482 34 358 35
Profit for the period 667 818 557 840 20
Other capital items - (248) >100
Net profit attributable to non-controlling interests (25 163) (1 654) (1 421)
Attributable to Vukile group 642 655 555 938 16
Non-IFRS adjustments
Shares issued cum dividend 70 888 22 588 214
Available for distribution 713 543 578 526 23
Proposed dividend 701 539
Number of shares in issue at 30 September(1) 875 339 319
Dividend per share 78.10251
(1) An additional 22 889 305 shares were issued in terms of the Kolonade Retail Park acquisition post 30 September
2018 and qualify for the above dividend.
Notes to the condensed financial statements for the six months ended 30 September 2018
1. COMPLIANCE WITH IFRS
1.1 Basis of accounting
This is the first set of group financial statements where IFRS 15 and IFRS 9 have been applied. Changes to
significant accounting policies are described in Note 1.3.
1.2 Use of estimates and judgements
In preparing these interim financial statements, management has made judgements and estimates that affect the
application of accounting policies and the reported amounts of assets and liabilities, income and expenses.
Actual results may differ from these estimates. The significant judgements made by management in applying the
group's accounting policies and the key sources of estimation uncertainty were the same as those described in
the last annual financial statements, except for new significant judgements and key sources of estimation
uncertainty related to the application of IFRS 9, which are described in Note 1.3.
Estimates
The revaluation of investment properties requires judgement in the determination of future cash flows from leases
and an appropriate reversionary capitalisation rate. Note 2.2 sets out further details of the fair measurement
of investment properties.
Judgements
Business combination versus asset acquisition
Management assessed properties acquired and has concluded that in its view, except for Castellana (acquired
in a prior period), all acquisitions are property acquisitions in terms of IAS 40 - Investment Property and
are therefore accounted for in terms of that standard. Apart from Castellana, in the opinion of management,
these properties did not constitute a business as defined in terms of IFRS 3 - Business Combinations, as
there were no adequate processes identified within these properties to warrant classification as businesses.
1.3 Change in accounting policies
Except as described below, the accounting policies applied in these interim financial statements are
the same as those applied in the group's consolidated financial statements as at and for the year ended
31 March 2018. The changes in accounting policies are also expected to be reflected in the group's
consolidated financial statements as at and for the year ending 31 March 2019. The group has initially
adopted IFRS 15 - Revenue from Contracts with Customers and IFRS 9 - Financial Instruments from
1 April 2018. IFRS 15 does not have a material effect on the group's financial statements.
IFRS 9
IFRS 9 sets out requirements for recognising and measuring financial assets and financial liabilities.
This standard replaces IAS 39 - Financial Instruments: Recognition and Measurement. The group has elected
not to restate comparatives on initial application. The group also elected to early adopt the IFRS 9 hedge
accounting requirements which is applied prospectively.
Hedge accounting:
IFRS 9 requires that the group's hedge accounting relationships are aligned with risk management
objectives and strategies and to apply a more qualitative and forward-looking approach in assessing
hedge effectiveness.
All hedging relationships designated under IAS 39 at 31 March 2018 met the criteria for hedge
accounting under IFRS 9 at 1 April 2018. The following table summarises the group's hedging
relationships under IFRS 9:
Hedging instrument Hedged item Hedging relationship
Interest rate swaps Floating rate debt Cash flow hedge
GBP forward exchange contracts GBP dividend income Net investment hedge
EUR forward exchange contracts Net investment in a foreign operation Net investment hedge
Cross currency interest rate swaps Net investment in a foreign operation Net investment hedge
EUR denominated debt Net investment in a foreign operation Net investment hedge
Classification and measurement:
IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of
financial liabilities. However, it eliminates the previous IAS 39 categories for financial assets of held
to maturity, loans and receivables and available for sale. The adoption of IFRS 9 has not had a significant
effect on the group's accounting policies related to financial liabilities and derivative financial instruments.
The following accounting policies apply to the subsequent measurement of financial assets:
Financial assets at fair These assets are subsequently measured at fair value. Net gains and
value through profit losses, including any interest or dividend income, are recognised
and loss (FVTPL) in profit or loss.
Financial assets at These assets are subsequently measured at amortised cost using the
amortised cost effective interest method. The amortised cost is reduced by impairment
losses. Interest income, foreign exchange gains and losses and
impairments are recognised in profit or loss. Any gain or loss on
derecognition is recognised in profit or loss.
Equity investments at fair These assets are subsequently measured at fair value. Dividends are
value through other recognised as income in profit or loss unless the dividend clearly
comprehensive income (FVOCI) represents a recovery of part of the cost of the investment. Other net
gains and losses are recognised in OCI and are never reclassified to
profit or loss.
The following table explains the original measurement categories under IAS 39 and the new measurement
categories under IFRS 9 for each class of the group's financial instruments as at 1 April 2018. The
only change in classification relates to the executive share scheme that is now classified as fair
value through profit and loss:
IAS 39 IFRS 9 IAS 39 IFRS 9
GROUP classification classification measurement measurement
ASSETS
Equity Investments Fair value through Fair value through 1 384 645 1 384 645
profit and loss profit and loss
- mandatory
Executive Share Scheme Available-for-sale Fair value through (10 954) (10 954)
profit and loss
- mandatory
Long term loans granted Loans and Amortised Cost 103 672 103 672
receivables
Trade and other Loans and Amortised Cost 186 743 178 346
receivables(1) receivables
Cash and cash equivalents Loans and Amortised Cost 1 093 860 1 093 860
receivables
Derivative Fair value through Fair value through
financial instruments profit and loss profit and loss 26 039 26 039
- mandatory
Total 2 784 005 2 775 608
LIABILITIES
Executive Share Scheme Available-for-sale Fair value through 45 053 45 053
profit and loss
- mandatory
Borrowings Loans and Amortised Cost 6 900 730 6 878 408
receivables
Trade and other Loans and Amortised Cost 428 733 428 733
payables receivables
Shareholders Loans and Amortised Cost - -
for dividends receivables
Derivative financial Fair value through Fair value through 131 479 131 479
instruments profit and loss profit and loss
- mandatory
Total 7 505 995 7 483 673
(1) Lease receivables continue to be measured in terms of IAS 17.
Impairment of financial assets:
IFRS 9 replaces the "incurred loss" model in IAS 39 with an "expected credit loss" (ECL) model. The
new impairment model applies to financial assets measured at amortised cost, lease receivables and
debt investments at fair value through other comprehensive income, but not to investments in
equity instruments.
At each reporting date, the group assesses whether financial assets carried at amortised cost
(such as long-term loans granted) are credit-impaired. The group considers a financial asset to
be in default when:
- the borrower is unlikely to pay its credit obligations to the group in full, without recourse by
the group to actions such as realising security (if any is held); or
- the financial asset is more than 90 days past due.
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present
value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance
with the contract and the cash flows that the group expects to receive).
The group has elected to measure loss allowances for trade receivables (including lease receivables) at
an amount equal to lifetime ECLs by making use of the simplified impairment model. When estimating ECLs,
the group considers reasonable and supportable information that is relevant and available without undue
cost or effort. This includes both quantitative and qualitative information based on the group's historical
experience and includes forward-looking information.
The following analysis provides further detail about the calculation of ECLs related to lease receivables
on the adoption of IFRS 9. The group considers the model and some of the assumptions used in calculating
these ECLs as key sources of estimation uncertainty. The ECLs were calculated based on actual credit loss
experience over the past 12 months. The group performed the calculation of ECL rates separately for national
tenants, government entities, and other tenants.
Exposures within each group were segmented based on common credit risk characteristics. The weighted
average loss rate was adjusted to reflect differences between economic conditions during the period over
which the historical data was collected, current conditions and the group's view of economic conditions
over the expected lives of the receivables. The following table provides information about the exposure
to credit risk and ECLs for lease receivables as at 1 April 2018:
Gross Impairment
carrying Weighted loss
amount average allowance
GROUP R000 loss rate R000
National tenants
Current 9 192 10.53% 968
30 days past due 1 766 11.51% 203
60 days past due 904 10.43% 94
90 days past due 951 10.99% 104
120 days past due 441 11.83% 52
150 days past due 2 223 12.62% 281
South African Government
Current 401 6.17% 25
30 days past due 316 9.63% 30
60 days past due 168 9.63% 16
90 days past due 57 10.24% 6
120 days past due 68 11.56% 8
150 days past due 191 15.60% 30
Namibian Government
Current 686 10.00% 69
30 days past due 506 10.00% 51
60 days past due 275 10.00% 27
90 days past due 258 10.00% 26
120 days past due 257 10.00% 26
150 days past due 3 234 10.00% 323
Regular tenants
Current 12 365 28.54% 3 529
30 days past due 5 825 36.91% 2 150
60 days past due 4 112 38.51% 1 583
90 days past due 3 511 44.77% 1 572
120 days past due 3 437 49.87% 1 714
150 days past due 40 966 55.01% 22 535
Other tenants 5 889 - -
Financial liabilities
Under current IAS 39, a foreign subsidiary modified its financial liabilities without triggering derecognition.
Under IFRS 9, this modification resulted in an adjustment to opening retained earnings which will be amortised
over a six year period.
Conclusion
The following table summarises the overall impact, net of tax, of the transition to IFRS 9: (R000)
Non-
controlling
Opening interest net of
retained deferred tax Impairment Deferred
earnings Borrowings Dr/(Cr) provision tax asset
Dr/(Cr) Dr/(Cr) Dr/(Cr) Dr/(Cr)
Non-substantial loan
modifications (22 040) 22 322 (282) - -
Expected credit losses
on receivables 6 423 - (211) 8 397 (1 763)
2. MEASUREMENTS OF FAIR VALUE
2.1 Financial instruments
The following table presents financial assets and liabilities measured at fair value in the statement of
financial position in accordance with the fair value hierarchy. The level within which the financial asset
or liability is classified is determined based on the lowest level of significant input to the fair value.
30 September 2018
Level 1 Level 2 Total
GROUP R000 R000 R000
ASSETS
Equity investments at fair value through profit and loss 1 392 924 - 1 392 924
Executive share scheme financial asset 73 054 - 73 054
Derivative financial instruments - 10 313 10 313
Total 1 465 978 10 313 1 476 291
LIABILITIES
Executive share scheme financial liabilities - (32 850) (32 850)
Derivative financial instruments (Note 1) - 393 164 393 164
Total - 360 314 360 314
Net fair value 1 465 978 370 627 1 836 605
Note 1
Derivative financial liabilities includes a net settled derivative of R1.3 million in respect of
the Morzal acquisition. The derivative has been valued using a Black Scholes Option pricing model
which assumes the efficient market hypothesis requiring that markets react to perfect information
and that share price movements are normally distributed. Although Castellana shares are listed but
illiquid, the Black Scholes model still provides the best estimate of the value of this derivative.
On 31 July 2018, Vukile obtained a controlling interest in Morzal, with the minority partners being
Westbrooke Yield Plus (Westbrooke) and Morze European Real Estate Ventures (MEREV). The investment
agreement provided for a share swap of Morzal shares for Castellana shares on a 1 for 1 basis. The
share swap executed on 27 November 2017 reulted in the original shareholders of Morzal now holding a
proportionate number of Castellana shares, and Morzal becoming a 100% subsidiary of Castellana.
The agreement grants Vukile the right to require MEREV to sell its Castellana shares to one or more
third parties. There is also a pre-emptive right in favour of Vukile should MEREV wish to sell its
Castellana shares to a third party. Should a trigger event or a repayment date occur, Castellana is
required to act as agent to sell MEREV's Castellana shares to a third party at a predetermined price.
In the event that Castellana does not successfully place the shares at the predetermined price, Vukile
will be required to make good the difference between the selling price and the predetermined rate,
namely will be required to net settle any shortfall.
Similarly, Vukile has been awarded a pre-emptive right should Westbrooke wish to sell their shares
in Castellana. The agreement also provides for Westbrooke's monetisation right to request Castellana
to act as an agent to procure a purchaser for their Castellana shares, which purchaser could include
Vukile. Should Westbrooke's remaining Castellana shares not be purchased by a third party at a
predetermined price, Vukile will be obliged to net settle the difference between the selling price
and the predetermined rate. Should the monetisation right not be utilised, Vukile will have a Placement
Right to procure a third party to purchase the shares in Castellana.
30 September 2017 31 March 2018
Level 1 Level 2 Total Level 1 Level 2 Total
GROUP R000 R000 R000 R000 R000 R000
ASSETS
Equity investments
at fair value through
profit and loss 1 357 556 - 1 357 556 1 384 645 - 1 384 645
Available-for-sale
financial asset 71 519 - 71 519 79 152 - 79 152
Derivative financial
instruments - 489 489 - 26 039 26 039
Total 1 429 075 489 1 429 564 1 463 797 26 039 1 489 836
LIABILITIES
Available-for-sale
financial liabilities - (28 734) (28 734) - (45 053) (45 053)
Derivative financial
instruments - (231 896) (231 896) - (131 479) (131 479)
Total - (260 630) (260 630) - (176 532) (176 532)
Net fair value 1 429 075 (260 141) 1 168 934 1 463 797 (150 493) 1 313 304
There have been no significant transfers between levels 1 and 2 in the reporting period
under review.
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.
Equity 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.
Executive share scheme financial assets and liabilities (Previously: Available-for-sale financial
asset and liabilities)
This comprises equity-settled share-based long-term incentive reimbursement rights, net of executive
rights, stated at fair value.
Derivative financial instruments
The fair values of these derivative instruments are determined by Absa Capital, Rand Merchant Bank,
Standard Bank, Nedbank, Investec Bank Limited, Banco Popular, Banco Santander and Caixabank 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, cross-currency interest
rate swaps and forward exchange contracts.
2.2 Non-financial assets
The following table reflects the levels within the hierarchy of non-financial assets measured at
fair value:
30 September 30 September 31 March
2018 2017 2018
Recurring Recurring Recurring
fair value fair value fair value
measurements measurements measurements
Level 3 Level 3 Level 3
GROUP R000 R000 R000
ASSETS
Investment properties 27 372 502 16 607 207 19 102 209
Investment properties held for sale 2 057 190 1 189 508 10 500
Fair value measurement of non-financial assets (investment properties)
The fair value of commercial buildings is estimated using an income approach which capitalises the
estimated rental income stream, net of projected operating costs, using a discount rate derived from
market yields. The estimated rental stream takes into account current occupancy levels, estimates of
future vacancy levels, the terms of in-place leases and expectations of rentals from future leases
over the remaining economic life of the buildings.
The most significant inputs are the discount rate and the reversionary capitalisation rate. The inputs
used in the valuations were:
30 September 2018
Reversionary
Discount rate capitalisation rate
Weighted Weighted
GROUP Range average Range average
Southern Africa 12.4% to 17.5% 13.6% 7.4% to 13% 8.8%
Spain 7.5% to 10.3% 8.6% 5% to 9.1% 6%
30 September 2017
Reversionary
Discount rate capitalisation rate
Weighted Weighted
Range average Range average
Southern Africa 12.8% to 19.6% 13.9% 7.8% to 15.1% 9.1%
Spain (at 30 June 2017) 7.4% to 10.3% 8.4% 5.7% to 9.5% 6.5%
31 March 2018
Reversionary
Discount rate capitalisation rate
Weighted Weighted
Range average Range average
Southern Africa 12.2% to 17.3% 13.4% 7.5% to 12.8% 8.6%
Spain 7.5% to 10.3% 8.8% 5% to 9.1% 6.1%
The estimated fair value would increase/(decrease) if the expected market rental growth was higher/(lower),
expected expense growth was lower/(higher), the vacant periods were shorter/(longer), the occupancy rate was
higher/(lower), the rent-free periods were shorter/(longer), the discount rate was lower/(higher) and/or the
reversionary capitalisation rate was lower/(higher).
2.3 Investments outside South Africa
The relevant exchange rates used to convert to Rand at the respective dates were as follows:
Spot rates at Spot rates at Spot rates at
30 September 30 September 31 March
2018 2017 2018
EUR 16.4069 16.0316 14.5730
GBP 18.4125 18.1557 16.5889
3. ACQUISITION OF SUBSIDIARIES
During the period under review, the group acquired two new subsidiaries in Spain which have been consolidated
since the acquisition date. Management concluded that in its view, these two acquisitions are property
acquisitions and are therefore accounted for in terms of IAS 40 - Investment Property. These properties did
not constitute a business as defined in terms of IFRS 3 - Business Combinations, as there were no adequate
processes identified within these properties to warrant classification as businesses.
Purchase Purchase
price price Date of
R000 EUR000 purchase
Junction Parque Habaneras S.L. 636 390 42 700 08/05/2018
Morzal Property Iberia S.L. 1 827 888 119 000 27/07/2018
4. NON-CURRENT ASSETS HELD FOR SALE
The group's investment in MICC Namibia and Vukile's non-retail, commercial and industrial portfolio are
held for sale in terms of IFRS 5. The non-current assets held for sale comprise of the following:
30 September
2018
R000
ASSETS
Investment Properties 1 965 922
Investment Properties 2 036 011
Straight-line rental income adjustment (70 089)
Straight-line rental income asset 70 089
Transfer of cash generating units goodwill from other non-current assets 21 179
Non-current assets held for sale 2 057 190
www.vukile.co.za
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