Wrap Text
Summarised consolidated results for the year ended 31 March 2019 and change to the board of directors
Vukile Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2002/027194/06)
JSE share code: VKE
ISIN: ZAE000056370
Debt company code: VKEI
NSX share code: VKN
(granted REIT status with the JSE)
(Vukile or the group or the company)
SUMMARISED CONSOLIDATED RESULTS
for the year ended 31 March 2019 and change to the board of directors
HIGHLIGHTS
Vukile is a high-quality, low-risk retail REIT in southern Africa with growing international exposure in Spain.
The results show a strong operational focus with a core competence in active asset management.
7.5% increase in dividends in line with guidance to 181.48 cents per share
Strong balance sheet and capital market support
- ICR of 6 times
- LTV reduced to 37% with 96% of debt hedged
- Corporate long-term credit rating upgraded to A+(ZA)
- Raised R2.6 billion in new equity during the year and R700 million in April 2019
- Raised R1.2 billion in corporate bonds
Significant presence in Spain
- Investment properties increased to €916 million from €308 million following the acquisition of five
dominant shopping centres
- Positive benefits of diversification with a solid pipeline of opportunities
Value-add asset management from Castellana
- All retail parks acquired in June 2017 now fully let
- Like-for-like growth in gross rental income of 3.5%
- Reversions and new lettings at 11% above expiring rentals
- Successful redevelopment of Kinepolis Leisure Centre at a yield of 11%
Continuing solid operating performance in southern Africa
- Positive retail reversions at +4.5%
- Retail vacancies reduced to 3.0% with 87% tenant retention
- Like-for-like growth in net income of total portfolio of 3.4%
- Established Vukile Academy
COMMENTARY
1. Nature of operations
The group is a long-term investor in retail-focused property portfolios with strong contractual cash
flows managed for income growth, sustainability and capital appreciation.
2. Summary of group financial performance
The group's total assets amounted to R35.1 billion at 31 March 2019. The group's direct property
investments were valued at R30.5 billion at 31 March 2019 (March 2018: R19.2 billion), and are located
in South Africa, Namibia and Spain. The Spanish properties were valued at R14.9 billion (€916 million)
at year-end (March 2018: R4.5 billion (€308 million)).
Additionally, Vukile held the following listed investments at year-end:
- A 34.9% shareholding in an associate, Atlantic Leaf Properties Limited (Atlantic Leaf) with a carrying
value of R1.3 billion (March 2018: R1.2 billion). The net asset value of Atlantic Leaf at February 2019
amounted to £195 million (February 2018: £204.2 million);
- A 26.9% shareholding in Fairvest Property Holdings Limited (Fairvest) valued at R568 million
(March 2018: R595 million); and
- A 25.3% shareholding in Gemgrow Properties Limited (Gemgrow) valued at R729 million
(March 2018: R790 million).
Ongoing improvements in financial and operating metrics
The group is focused on generating dividends that are growing, sustainable, and predictable over the
long term. Key decisions and strategies are aligned to this long-term approach and the group will avoid
transactions which do not complement the longer-term strategies of the group.
It is pleasing to report that the dividend for the six months ended 31 March 2019 increased by 7.5% to
103.37872 cents per share. Dividends for the full year rose by 7.5% to 181.48123 cents per share in line
with guidance.
The group's net profit available for distribution was R1.7 billion for the year ended 31 March 2019, representing
an increase of 30% (March 2018: R1.3 billion).
The proposed total dividend for the year comprises:
% Cents
Rm split per share
First 701.5 41.5 78.10251
Second(1) 988.5 58.5 103.37872
Total 1 690.0 100.0 181.48123
(1) Based on shares in issue at 29 May 2019.
Key financial measures March March %
2019 2018 change
Dividend per share (cents) 181.48 168.82 7.5
Earnings (Rm) 1 709 2 402 (28.9)
Net asset value per share (cents) 2 026 2 010 0.8
Loan to value ratio net of cash (%)(1) 37.2 28.2
Gearing ratio (%)(2) 37.0 29.6
(1) Based on directors' valuations of the group's portfolio and the market value of equity investments at
31 March 2019 less cash (excluding cash held on deposit from tenants).
(2) The gearing ratio is calculated by dividing total interest-bearing borrowings by total assets.
Share price and liquidity
Vukile's share price decreased by 8.6%, from R21.88 per share at 31 March 2018 to R20.00 per share at year-end.
Vukile's share price performed better than the SAPY index which declined by 12.2% over the same period.
Vukile's market capitalisation at year-end amounted to R18.4 billion (March 2018: R17.2 billion).
During the 12 months ended 31 March 2019, 344 million Vukile shares were traded, which equates to approximately
28.7 million shares per month. The total value of shares traded during the year amounted to R7 billion or 38% of
the company's market capitalisation at 31 March 2019 (March 2018: 41%), demonstrating the liquidity of Vukile's
shares in the market.
Equity issuances
Equity issuance and dividend reinvestments for the year amounted to R2.6 billion:
- Vukile issued 86 715 812 shares under an accelerated bookbuild on 26 July 2018 at R18.66 per share, including
a specific issue to Encha Properties Equity Investments (Pty) Ltd (Encha) at R19.60 per share, raising R1.6 billion.
- Shares issued under an election to reinvest cash dividends in return for shares were as follows:
- 22 June 2018: 3 857 140 shares at R20.30 - R78 million; and
- 24 December 2018: 4 480 038 shares at R19.40 - R87 million.
- On 5 November 2018, Vukile issued 22 889 305 shares to settle the purchase price of R470.6 million for
Kolenade Retail Park.
- Vukile issued 18 253 483 shares under two further issuances in February and March 2019 at an average of
R20.21 per share - raising R369 million.
Cash flow
The major items reflected in the composition of cash generated and utilised during the year under review
are set out below:
Rm
Cash from operating activities 1 786
Issue of shares 2 615
Borrowings and advances 6 895
Borrowings repaid (1 892)
Acquisitions/improvements to investment properties: Local (988)
: Spain (8 586)
Dividends paid (1 518)
Equity contribution from non-controlling shareholders 1 828
Cash flow from operating activities more than covered the full dividend for the year.
Additional net debt raised of R5.6 billion, share issuances of R2.6 billion and external investors funding
into Castellana of R1.8 billion were utilised to acquire investment properties of R10.1 billion,
mainly in Spain.
Net asset value
The net asset value (NAV) of the group increased over the reporting period by 0.8% from 2 010 cents per
share to 2 026 cents per share at 31 March 2019, as set out in the table below.
Cents
per share
Opening NAV 1 April 2018 2 010
Investment properties 1 340
Investment properties held for sale 126
Other non-current assets 17
Current assets 18
Current liabilities (18)
Non-current liabilities (835)
Non-controlling interest (283)
Adjusted for additional shares in issue (349)
Closing NAV 31 March 2019 2 026
The NAV of 2 026 cents per share represents a slight premium to Vukile's share price of 2 000 cents per share
at 31 March 2019.
It should be noted that although the gross change in fair value of investments amounted to R804 million for
the year ended 31 March 2019, this increase to NAV was offset by the following:
Rm
Unrealised fair value loss on listed property shares (88)
Unrealised foreign exchange loss on foreign loans (66)
Impairment of goodwill (48)
Fair value loss on net-settled derivatives (208)
(410)
The group's NAV would increase to 2 070 cents per share if the impact of the temporary items above
are excluded.
Extract from the calculation of distributable earnings for the year ended 31 March 2019
2019 2018 Variance
GROUP R000 R000 R000 R000 % Notes
Property revenue 2 186 904 1 561 798 40.0
Property expenses (net of recoveries) (312 603) (252 723) (23.7)
Net profit from property operations
per segmental report excluding
straight-line rental income accrual 1 874 301 1 309 075 43.2 (i)
Investment and other income 344 815 323 255 9.5 (ii)
Dividends received 126 390 137 889 (8.3)
Interest and other income 218 425 185 366 17.8
Share of income from associate
(Atlantic Leaf) 53 585 95 485 (43.8)
Corporate expenditure (199 371) (127 474) (56.4) (iii)
Finance costs (509 749) (367 808) (38.6) (iv)
Full details of distributable income are set out in the segmental report included in the separate
consolidated annual financial statements for the year ended 31 March 2019.
(i) Group net profit from property operations
Net group profit from property operations, excluding the straight-line income adjustment, increased
by R565 million (43%) from R1.31 billion to R1.87 billion. The Castellana growth contributed R669 million
(36%) towards the group's net profit from property operations (March 2018: R174 million). The growth in
net property revenue of the stable portfolio was 3.4%.
Group tenant arrears
Group tenant arrears (including tenant recharge accruals) amounted to R189 million at year-end
(March 2018: R116 million) or 6.7% of gross rental income (March 2018: 5.8%). The increase of
R73 million mainly arises due to the addition of Morzal debtors of R46 million being included for
the first time. Castellana's in-house leasing team collects at least 99% of monthly rentals invoiced.
The retail sector reported lower sales growth in general during the past financial period and the
difficult trading environment has affected certain non-national tenants negatively. Our primary
property managers, Excellerate Real Estate Services (Pty) Ltd trading as JHI and Broll Property
Group (Pty) Ltd, report similar trends across the various portfolios they manage.
Impairment allowance - tenant receivables
The allowance for the impairment of tenant receivables decreased by R9.5 million from R43.7 million
at 31 March 2018 to R34.2 million at 31 March 2019, under the new IFRS 9 requirements. The allowance
is considered to be adequate. The impairment allowance represents 1.2% of gross property revenue
(March 2018: 2.2%). In total, 26% of group tenant arrears have been accounted for as impaired.
A summary of the movement in the impairment allowance of trade receivables is set out below:
Group
R000
Allowance for impairment of trade receivables:
At 1 April 2018 43 709
IFRS 9 adjustment (8 397)
Reduction in the impairment allowance (1 098)
At 31 March 2019 34 214
Rental written off in the statement of profit or loss 14 868
(ii) Group investment and other income
Investment and other income increased by R21.6 million to R345 million, made up as follows:
2019 2018 Movement
R000 R000 R000 %
Dividends received 126 390 137 889 (11 499) (8.3)
Interest and other income 55 351 91 490 (36 139) (39.5)
Cross-currency interest rate swaps (CCIRS) 163 074 93 876 69 198 73.7
344 815 323 255 21 560 6.7
Dividends received of R126.4 million during the year comprised:
Fairvest R54.5 million
Gemgrow R71.9 million
R126.4 million
Fairvest has performed well during the year, while Gemgrow's results have been disappointing, resulting
in a reduction in dividend income of R11.5 million year-on-year.
Higher net interest of R69 million on CCIRS was generated mainly due to €89 million new CCIRS concluded
during the year. This higher income was offset by lower bank and money market interest earned compared
to the prior year as surplus cash resources were extensively used to part fund new acquisitions in Spain.
(iii) Group corporate expenditure
Group corporate and administrative expenditure of R199.4 million is R71.9 million higher than the previous
year's expenditure (March 2018: R127.5 million).
The key factors giving rise to the above increases in corporate costs are as follows:
South Africa:
- Salary and related costs increased by R18 million comprising normal increases and the appointment of
two new employees, including the appointment of an in-house leasing specialist.
- New costs relating to the Vukile Academy of R5.5 million.
Spain:
- Salary costs increased to €2.7 million (approximating R43 million) at 31 March 2019 (March 2018:
€0.5 million). The number of employees in the Castellana team increased to 24 employees compared
to eight employees in the previous year. The Castellana team is now at scale and the business could
absorb another three assets without having to increase the staff complement.
Corporate expenditure equates to 0.57% of total assets (March 2018: 0.55%).
(iv) Group finance costs
Group finance costs increased by R142 million, from R368 million to R510 million.
The primary reasons for this increase are set out below:
- Interest was incurred on new R600 million debt drawn from local banks off Vukile's balance sheet to
part fund the acquisitions of Habaneras and the four shopping centres by Castellana from
Unibail-Rodamco-Westfields.
- Additional debt of €300 million was raised by Castellana to part fund the abovementioned
acquisitions which incurred finance costs of R113 million. This new debt is compared to the
€246 million debt in place in the prior year. This debt is non-recourse to Vukile, and secured
against Spanish assets only.
The average cost of finance (including amortisation of capital raising fees) for the year equates to
4.53% (March 2018: 5.74%), with interest-bearing term debt being 96% hedged (March 2018: 100%).
(v) Investments in associates at fair value
Fairvest - 26.9%
Fairvest continues to focus on the lower living standards measure (LSM) retail market, similar to
Vukile's strategy, but targeting smaller properties. Fairvest management has forecast a distribution
growth of 8% to 10% for the period ending 30 June 2019.
Vukile owned 270.4 million shares in Fairvest at 31 March 2019 valued at R568 million. Dividends of
R54.5 million (March 2018: R21.5 million) were received during the year ended 31 March 2019. Dividends
calculated on a full 12-month period equates to a yield of 9.6% based on the value of Fairvest's
shares at year-end.
Gemgrow - 25.3%
Vukile owned 4.7 million Gemgrow "A" shares and 114.4 million Gemgrow "B" shares with a combined value
of R729 million at year-end.
Gemgrow's management has forecast a reduction in dividends for the "B" shares of 10% for the year ending
30 September 2019.
Dividends received in respect of the "A" and "B" shares held by Vukile for the year ended 31 March 2019
amounted to R71.9 million (March 2018: R92.6 million), a decrease of 6.5% from the prior year.
The management of Gemgrow and Arrowhead Properties Limited announced on 10 April 2019 that an agreement
in principle had been reached for a reverse takeover of Gemgrow by Arrowhead, creating a company with a
market capitalisation of R6.8 billion. This should result in a savings in corporate costs and provide
for a Gemgrow "B" share which is expected to be significantly more liquid than at present.
Vukile does not consider this investment core to its strategy and will seek to dispose of this investment
at an appropriate time and price, in order to reinvest the proceeds into investment opportunities
in Spain or South Africa.
(vi) Investment in associate equity accounted
Atlantic Leaf - 34.9%
Atlantic Leaf's assets (net of straight-line lease income adjustment) have increased to £372 million at
28 February 2019 (28 February 2018: £363 million) while total revenue increased by 11.5% to £26.9 million
for its financial year ended 28 February 2019.
The company's focus on the UK industrial and warehouse distribution centres, an attractive market segment,
has provided growth in distributions of 2.2%, from 9.1 pence to 9.3 pence for the year ended
28 February 2019.
Dividends of R115.4 million, including the positive impact of hedging these dividends, were earned during
the year to 31 March 2019. Vukile's share of equity-accounted profits from Atlantic Leaf for the year
ended 31 March 2019 amounted to R53.6 million. Dividend income has generated an 8.3% yield in Pound
Sterling for Vukile, based on the carrying value of the investment in Atlantic Leaf at year-end of
R1.3 billion.
Atlantic Leaf's management are forecasting a dividend of 10 pence per share for the year ending
28 February 2020, or a 7.5% growth in dividends. However, Atlantic Leaf's after-tax earnings will
be boosted due to corporate taxes no longer being payable following its conversion to a UK REIT.
Any dividends it declares will be subject to a 20% withholding tax, with 5% being recoverable from
the UK tax authorities in terms of the Double Tax agreement concluded between South Africa and the
United Kingdom. In total, 72% of the £5.6 million dividends forecast to be received from Atlantic
Leaf by Vukile for the year ending March 2020 are subject to forward exchange contracts, at an
average exchange rate of R20.38.
While performing in line with expectations, Vukile is open to exploring an exit of its stake in
Atlantic Leaf and to redeploy the proceeds in its core Spanish strategy.
(vii) Investment in subsidiary
Castellana - 72.2%
Despite Castellana's significant growth in assets for the current year, Vukile's shareholding in
Castellana has decreased over the year from 98.7% to its current level of 72.2% as a result of
introducing a strategic minority shareholder who part funded the equity required for the
Unibail-Rodamco-Westfields transaction and now holds 18.2% of Castellana. Other minority
shareholders hold 9.6%.
Details of the Spanish property portfolio, including details relating to acquisitions, valuations,
value creation and investment strategy are set out in the portfolio review - Spain section in
this report.
Key financial measures
2019 2018
Declared and
Cash dividends net of withholding paid in May 2018 for the
taxes ((2.0%) (March 2018: 2.66%)) - €10.4 million year ended 31 December 2017
Declared for the six months
ended 30 September 2018
€7.5 million - and paid in November 2018
Declared and paid in
May 2019 for the year
€11.3 million - ended 31 March 2019
Investment properties €916 million €308 million
Interest-bearing debt €450 million €146 million
Loan to value ratio net of cash (%) 45.9 42.2
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 requires
Castellana's consolidated annual financial statements to be prepared under IFRS. The consolidated
IFRS financial statements have been used in the preparation of Vukile's consolidated annual
financial statements.
Treasury management
Group borrowings
The group's finance strategy is to optimise funding costs and minimise refinance risk.
Total debt as at 31 March 2019 amounted to R13.2 billion. A detailed breakdown is provided below:
Rm*
Foreign Spanish funders (EUR) - four - Secured only against Castellana's balance
Spanish bank funders 7 322 sheet with no recourse to Vukile
Local funders (EUR) - four local bank funders 2 140
Local funders (GBP) - one local bank funder 542 - Partly secured against
Local funders (ZAR) - five local bank funders 1 219 Vukile's SA balance sheet
DMTN (ZAR) 2 007
13 230
* Excludes debt raising fees of R252 million.
Sources of funding
Vukile's funding of R13.2 billion is well diversified across a number of funders, in line with
its strategy of reducing refinancing risk.
Debt Hedging
exposure and fixed
Debt(1) per bank debt(2)
R000 % R000
Group debt and hedging exposure per bank in ZAR
Aareal(3) 4 850 309 36.66 4 850 309
DMTN term debt 2 007 000 15.17 -
Absa 1 520 478 11.49 2 616 957
Caixabank(3) 1 296 781 9.80 1 235 623
Banco Santander(3) 991 522 7.49 954 827
Investec 921 420 6.96 1 155 497
Standard Bank 777 812 5.88 902 323
RMB 581 735 4.40 40 646
Banco Popular(3) 183 247 1.39 183 247
Nedbank 100 000 0.76 280 000
Grand total 13 230 304 100.00 12 219 429
(1) Foreign currency denominated debt converted at EUR/ZAR spot rate of 16.2582 and GBP/ZAR spot
rate of 18.8855 at 31 March 2019.
(2) Hedging exposure is represented by exposure per banking relationship.
(3) Group exposure includes Castellana Properties SOCIMI debt of €450.3 million (R7.32 billion
equivalent), and swaps of €146.0 million (R2.37 billion equivalent).
Vukile group loan and swap expiry profile at 31 March 2019
The strategy of ensuring that no more than 25% of debt expires in any one year is being monitored.
Vukile group loan and hedging (swap and fixed term debt) expiry profile at 31 March 2019:
2020 2021 2022 2023 2024 2025 2026 Total
Loan expiry profile (Rm) 1 084 1 441 2 454 1 330 1 612 - 4 850 12 771
Commercial paper and
access facility expiry
profile (Rm) 347 12 100 - - - - 459
Hedging (swap and fixed
debt) profile (Rm) 518 842 2 013 2 145 6 676 25 - 12 219
A summary of group debt ratios at 31 March 2019 is provided below:
Group South Africa Spain
R000 R000 €000
Total debt (excluding access facilities
and commercial paper) 12 771 363 5 449 504 450 349
Interest-bearing debt hedged (%) 95.68 91.67 98.66
Debt maturity profile (years) 3.92 2.01 5.46
Swaps - maturity profile (years) 3.55 2.66 4.16
Interest cover ratio (times)(3) 6.05 7.94 4.07
Directors' valuation LTV ratio (excluding MTM of 37.18 29.98 45.93
derivatives) net of cash(1) (%)
Gearing ratio(2) (%) 37.00 30.13 45.63
(1) Directors' valuation LTV ratio is calculated as a ratio of interest-bearing debt divided
by the sum of (i) the amount of the most recent directors' valuation of all the properties
in the Vukile group property portfolio, on a consolidated basis, and (ii) the market value
of equity investments.
(2) Gearing is calculated as a ratio of total interest-bearing borrowings to total assets.
(3) Interest cover ratio is based on the operating profit excluding straight-line lease income
plus dividends from equity-accounted investments and listed securities income (EBITDA) divided
by the finance costs after deducting all finance income (net interest cost).
Undrawn available facilities at 31 March 2019
Undrawn available facilities amount to R1.4 billion.
Unencumbered assets at 31 March 2019
As at 31 March 2019, unencumbered assets amounted to R7.2 billion (R3.4 billion property assets
and R3.8 billion listed shares) compared with unsecured debt of R1.3 billion. The total unsecured
debt to unencumbered assets ratio at 31 March 2019 was 18.7% and total unsecured debt to unencumbered
property assets ratio at 31 March 2019 was 39.9%.
Ratings
Global Credit Rating Company (Pty) Ltd (GCR) affirmed a secured long-term credit rating of AA+(ZA),
corporate long-term credit rating upgraded to A+(ZA) and corporate short-term rating of A1(ZA), with
the outlook accorded as stable, in July 2018.
Group debt movement during the year ended 31 March 2019
During the 12-month period ended 31 March 2019 the total group debt increased by R6.2 billion.
Significant financing transactions are summarised below:
- R456 million of bank debt was repaid.
- R660 million unlisted and listed corporate bonds were repaid during the year.
- R317 million commercial paper was repaid during the year.
- R1.2 billion of new corporate bonds were issued.
- Within Castellana, €42 million of fixed bank debt was entered for the Habaneras acquisition -
this debt is non-recourse to Vukile.
- Proceeds of the Vukile equity bookbuild issuance of R1.6 billion were partially utilised together
with R400 million of ZAR bank debt and €15 million of EUR bank to acquire shares in Morzal for the
acquisition of four shopping centres in Spain.
- Within Castellana €256 million of fixed bank debt was entered and restructured for the acquisition
of four shopping centres - this debt is non-recourse to Vukile.
- Vukile rebalanced/extended and entered new ZAR interest rate swaps totalling R1.9 billion and entered
new EUR interest rate swaps totalling €15 million, at an estimated new annualised additional cost of
R2.5 million (R0.8 million cost for FY19).
The group has complied with all the bank's LTV covenants. The southern African group has also complied
with the DMTN covenants.
Group foreign exchange currency hedges at 31 March 2019
Vukile has adopted a strategy of hedging its foreign dividend exposure at 75% over a three to five-year
period in line with anticipated dates of dividend receipts.
EUR net income exposure - as at 31 March 2019
June December June December June December June December June
2019 2019 2020 2020 2021 2021 2022 2022 2023
€000 €000 €000 €000 €000 €000 €000 €000 €000
Dividend payment dates
Net EUR dividends
forecast 6 616 7 881 8 549 8 439 7 551 9 416 9 721 11 270 11 533
Existing CCIRS hedge
interest costs(1) (2 278) (2 291) (2 316) (2 278) (2 278) (1 228) (1 228) - -
Existing forward exchange
contract (FEC) hedges
on dividends (7 684) (5 375) (5 289) (5 495) (5 508) (4 600) (4 600) (4 600) (4 600)
Average FEC EUR/ZAR rate 16.9725 17.7734 18.4981 18.5148 19.4321 20.6629 21.5255 22.4193 23.3412
Unhedged dividend income (1 068) 2 506 3 260 2 944 2 043 4 816 5 121 6 670 6 933
FEC hedges/(net
distribution
+ CCIRS hedge) (%) 116.13 68.20 61.87 65.11 72.95 48.85 47.32 40.82 39.89
Average hedge (%) 75
(1) Funded out of EUR dividends receivable from Castellana.
75% of net EUR dividends are hedged over the next 2.5 years (5 Castellana dividends).
GBP net income exposure - as at 31 March 2019
May November May November
2019 2019 2020 2020
£000 £000 £000 £000
Dividend payment dates
Net GBP dividends forecast (after interest cost) 2 546 2 282 2 282 2 338
FEC hedges on dividends (2 035) (1 996) (2 045) (2 070)
Average FEC GBP/ZAR rate 19.2135 19.9029 20.6072 21.3622
Unhedged dividend income 511 286 237 268
FEC hedges/net distribution (%) 80 87 90 89
Average hedge (%) 86
In total, 86% of net GBP dividends forecast are hedged over the next two years (four Atlantic Leaf dividends).
Group cost of finance at 31 March 2019
The make-up for the year ended 31 March 2019 of the historic weighted average interest cost of
4.53% comprises the following:
FY19
historic
weighted Debt as at
average cost 31 March
of finance 2019
(%) Rm
ZAR 9.21 3 226
EUR 2.70 9 462
GBP 3.45 542
Weighted average 4.53 13 230
SA REIT Association best practice recommendations
The SA REIT Association has published a draft second edition to its best practice recommendations
(BPR) for financial reporting. In support of the sector's transparency, Vukile is engaging SA REITs
regarding the reporting measures that will most clearly, accurately and consistently represent the
performance of REITs such as Vukile. The sector representative body has indicated that it expects
to finalise the second edition before the end of 2019 and that it should be effective for financial
year-ends starting from 1 January 2020. This will not impact Vukile's reporting for FY20.
3. Southern Africa property portfolio overview
The southern African property portfolio at 31 March 2019 consisted of 60 properties with a total value
of R15.5 billion (excluding the 20% non-controlling interest in Moruleng Mall) and gross lettable area
(GLA) of 988 303m2, with an average value of R258 million per property. The average value per property
on the retail portfolio is R316 million.
The geographical distribution of the southern African portfolio is indicated in the table below. The portfolio
is well represented in most of the South African provinces and Namibia. Some 76% of the gross income comes
from Gauteng, KwaZulu-Natal, Western Cape and Limpopo.
Total
portfolio
Geographic portfolio %
% of gross income
Gauteng 38
KwaZulu-Natal 22
Western Cape 8
Limpopo 8
Namibia 7
Free State 6
North West 4
Mpumalanga 4
Eastern Cape 3
Based on value, 92% of the southern African portfolio is in the retail sector, followed by 3% in the
industrial, 3% in the office, 1% in the motor-related sector and 1% in the residential sector.
The tenant profile is listed in the table below:
Total
Retail portfolio
Tenant profile % %
% of GLA
A - Large national and listed tenants and major franchises 74 69
B - National and listed tenants, franchised and
medium to large professional firms 9 8
C - Other (1 193 tenants) 17 23
Excluding 180 residential units
The retail portfolio's exposure to national, listed and franchised tenants is 83% in total.
The portfolio has low tenant concentration risk with the top 10 tenants accounting for 41.1% of total
rent and 47.3% of total GLA. Based on rent, the Pepkor group is the single largest tenant with 7.5%
of total rent (8.1% of retail rent), with Pick n Pay the second largest at 5.8% of total rent
(6.2% of retail rent).
The top 15 properties, all of which are retail assets, have 84.3% exposure to national, listed and
franchised tenants and represent 58.8% of the southern African portfolio value and 46.5% of the
southern African portfolio GLA.
Top 15 properties by value
Director's
valuation at
Rentable 31 March
area 2019 % Valuation
Property Location m2 Rm of total R/m2
Boksburg East Rand Mall(1) Gauteng 34 126 1 433 9.2 42 002
Pinetown Pine Crest KwaZulu-Natal 43 414 1 047 6.8 24 125
Durban Phoenix Plaza KwaZulu-Natal 24 231 940 6.1 38 812
Phuthaditjhaba Maluti Crescent Free State 35 335 667 4.3 18 887
Gugulethu Square Western Cape 25 322 553 3.6 21 840
Soweto Dobsonville Mall Gauteng 26 589 546 3.5 20 520
Queenstown Nonesi Mall Eastern Cape 27 898 500 3.2 17 905
Pretoria Kolonnade Retail Park Gauteng 39 450 497 3.2 12 598
Germiston Meadowdale Mall(2) Gauteng 33 156 438 2.8 13 225
Oshakati Shopping Centre Namibia 24 632 428 2.8 17 364
Daveyton Shopping Centre Gauteng 17 774 421 2.7 23 685
Thohoyandou Thavhani Mall(3) Limpopo 17 761 414 2.7 23 285
Bloemfontein Plaza Free State 43 771 411 2.7 9 388
Randburg Square Gauteng 40 767 409 2.6 10 025
Moruleng Mall(4) North West 25 274 399 2.6 15 790
Total top 15 properties 459 500 9 103 58.8 19 811
% of total portfolio 46.5 58.8
% of retail portfolio 53.4 64.0
(1) 50% undivided share in this property.
(2) 67% undivided share in this property.
(2) 33% undivided share in this property.
(4) 80% share in Clidet No 1011 (Pty) Ltd.
3.1 Valuation of southern African portfolio
The accounting policies of the group require that the directors value the entire portfolio every six months
at fair value. Using a DCF methodology 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 R15.5 billion(i) as at 31 March 2019. This is R1.0 billion or 7.0% higher
than the valuation as at 31 March 2018. Pretoria Kolonnade Retail Park was acquired for R471 million and
Hillcrest Richdens Shopping Centre was sold. The value of the stable portfolio increased by 3.3%. The
calculated recurring forward yield for the portfolio is 8.4%.
During the year all southern African properties were valued by external valuers and the valuations by Quadrant
Properties (Pty) Ltd and Knight Frank (Pty) Ltd are in line with the directors' valuations.
(i) The southern African property portfolio value takes into account Moruleng Mall at 80%, whereas in the
annual financial statements the group property value reflects 100% of Clidet No 1011 (Pty) Ltd, which
owns Moruleng Mall.
3.2 Southern African property portfolio performance
We achieved like-for-like growth in net profit from our southern African operations of 3.4%. Income was
under pressure at Sandton Sunninghill Sunhill Park due to increased vacancies, and at Rustenburg Edgars
and Vereeniging Bedworth Centre due to restructuring of leases. Excluding the reduced rentals at these
properties, property revenue escalated at 5.3% and net property income at 4.6%.
The above inflationary increase in net expenses is mainly contributed by the irregular municipal increases
in rates/taxes and utilities.
Financial performance for the stable portfolio (excluding acquisitions and sales)
31 March 31 March %
2019 2018 change
Property revenue (Rm) 1 364.9 1 308.3 4.3
Net property expenses (Rm) (231.2) (212.2) 9.0
Net property income (Rm) 1 133.7 1 096.1 3.4
Net cost to income ratio (%) 16.9 16.2
New leases and renewals in excess of 218 000m2 with a contract value of R1.8 billion were concluded during
the year, with tenant retention at 81% (retail portfolio 87%).
Expiry profile
The lease expiry profile table reflects that 23%, based on rent, of the leases are due for renewal in the
2020 financial year. Approximately 42% of leases are due to expire in 2023 and beyond (up from 38% in 2022
and beyond in the prior year).
Beyond
March March March March March
2020 2021 2022 2023 2023
Lease expiry % of rent % % % % %
Rent 23 17 18 12 30
Cumulative as at March 2019 23 40 58 70 100
Cumulative as at March 2018 47 62 73 84 100
Beyond
March March March March March
Vacant 2020 2021 2022 2023 2023
Lease expiry % of GLA % % % % % %
GLA 3.9 20 14 16 11 35
Cumulative as at March 2019 3.9 24 38 54 65 100
Cumulative as at March 2018 4.2 46 59 68 83 100
Vacancies
At 31 March 2019 the portfolio's vacancy (measured as a percentage of gross rental) was 3.6% excluding
development vacancy, compared to 3.7% at 31 March 2018. Retail vacancies decreased from 3.4% to 3.0% and
industrial from 6.0% to 2.9%. The main reason for the increased office vacancies during 2019 was the high
vacancy at Sunninghill Sunhill Park which is currently in the process of being sold.
March March
2019 2018
Vacancies (% of gross rental) % %
Retail 3.0 3.4
Industrial 2.9 6.0
Offices 19.6 10.3
Motor related - -
Total* 3.6 3.7
Including development vacancy the 2019 vacant rent is 4.4%.
* Excluding 14 vacant residential units.
The vacancy per sector (measured as a percentage of gross lettable area) is indicated in the table below:
March March
2019 2018
Vacancies (% of GLA) % %
Retail 3.0 3.9
Industrial 5.7 3.5
Offices 21.0 13.5
Motor related - -
Total* 3.9 4.2
Including development vacancy the 2019 vacant GLA is 4.2%.
* Excluding 14 vacant residential units.
GLA summary GLA m2
Balance at 31 March 2018 937 463
GLA adjustments 187
Disposals (10 196)
Acquisitions and extensions 60 849
Balance at 31 March 2019 988 303
Vacancy reconciliation Area m2 %
Balance at 31 March 2018 39 681 4.2
Less: Properties sold since 31 March 2018 (864) 8.5
Remaining portfolio balance at 31 March 2018 38 817 4.2
Leases expired or terminated early 204 625
Tenants vacated 38 197
Renewal of expired leases (137 991)
Leases to be renewed (26 872)
Development vacancy (2 840)
New letting of vacant space (75 091)
Balance at 31 March 2019 38 845 3.9
Base rentals (excluding recoveries)
The weighted average monthly base rental rates per sector, between 31 March 2018 and 31 March 2019,
are set out in the table below:
March March Escalation
Weighted average base rentals (R/m2) excluding recoveries 2019 2018 %
Retail 134.78 130.44 3.3
Industrial 57.83 54.42 6.3
Offices 95.32 95.74 (0.4)
Motor related 131.68 128.64 2.4
Total * 127.54 122.77 3.9
The average growth in the retail rental rate is influenced by the newly acquired Pretoria Kolonnade Retail
Centre's lower than average rate of R108/m2. If this property is excluded, the average retail rental rate is
R136.13/m2 showing a year-on-year growth of 4.4%.
* Excluding residential units.
The average contractual rental escalation of 7.0% is slightly lower than the previous year at 7.2%. We achieved
positive reversions of 4.0% on the total portfolio, with retail reversions at 4.5% and industrial at 5.5%.
Reversions were concluded at lower rates in the office sector. New leases were concluded at 3.2% above budget
in the retail sector. The ongoing pressure in the office and industrial sectors, to which we now have little
exposure, dictated that new leases be concluded below budget rates. This resulted in the total portfolio's
new leases finalised at 1.4% above budget.
Expense categories and ratios
The top four expense categories contribute 82% of 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.
3.3 Southern African property portfolio - developments, acquisitions and sales
Acquisition
Kolonnade Retail Park, Pretoria, Gauteng
We acquired the fully let 39 450m2 retail park for R470.6 million on a yield neutral basis.
This is a strong centre with a good tenant mix. This single-level centre is anchored by a 12 261m2 Pick n Pay
Hyper, with more than 40 stores, a health and fitness component and home decor appeal. It has a Virgin Active
Health Club with indoor swimming pool, Kauai-in-motion and Club V as well as a Sportsman's Warehouse, Mr Price
Sport, Puma, Tekkie Town and Chrome Supplements & Accessories. It also has a Continental Linen, Coricraft,
Dial-a-Bed, Good Knight Bedding, MRP Home, Plus10 Discount Furnishers, Rochester, Sheet Street and
UFO Furniture.
Vukile is very satisfied to have acquired Kolonnade Retail Park in a market where there are few sizeable,
quality assets available on the market. It is located in an established retail node and is ideally matched
to Vukile's investment strategy.
Completed upgrade project
Maluti Crescent, Phuthaditjhaba, Free State
Maluti Crescent, formerly Setsing Crescent, underwent a major R392 million redevelopment with a projected
yield of 8.09% on capital expenditure. The project added 13 797m2 of GLA and transformed the former strip
centre into a fully enclosed 35 335m2 mall with three levels of parking. The first phase of the expanded
Maluti Crescent Shopping Centre opened on 21 March 2019 to become the largest shopping centre in Phuthaditjhaba
in the Free State. It includes new undercover parking as well as the first and only structured taxi facility
of its kind in the area.
The major upgrade responds to shopper and retail demand. It builds on the centre's excellent trading metrics
and unlocks further income enhancement. Its development also achieved significant skills transfer through
local employment.
Redevelopment projects in progress
Pine Crest Shopping Centre, KwaZulu-Natal
Pine Crest, the first and still the biggest shopping centre in the Pinetown CBD, is being extended and upgraded
at a cost of R200 million with an expected yield of 7.4%. The project is due for completion by the end of
July 2019. The new mall, with street access, is linked to the existing banking mall which leads to the second
and third shopping levels by means of a new set of escalators. The new food court with direct access to the
planned GoDurban bus terminus will cater to both shoppers and commuters. Tenants already trading in the new
food court includes Spur, Nandos, KFC and Debonairs, all showing trade exceeding expectations.
The centre's rebranding and relaunching has been conceptualised and planned by Totem, a specialist rebranding
company based in Spain, but with international experience. It promises a brand new look and experience which
will ensure that Pine Crest not only stay the most popular shopping centre in the area but also keeps
on growing.
This capital investment keeps the centre relevant to its customer base, which has changed dramatically
in recent years.
Current southern African portfolio projects
Our major development capital expenditure projects approved and incurred to 31 March 2019 are:
Budget
Paid to April 2019
31 March to March
Approved 2019 2020
Approved Completion R000 R000 R000
Phuthaditjhaba: Maluti Crescent 31 August 2019 391 650 304 594 87 056
Pinetown: Pine Crest 31 July 2019 200 000 138 435 61 565
Durban: Phoenix Plaza 31 May 2018 35 000 31 444 3 556
Meadowdale Mall 29 August 2018 16 264 14 365 1 899
Springs Mall (25%) 29 March 2019 8 560 8 102 458
Hammarsdale Junction Extension 31 March 2019 4 500 3 227 1 273
655 974 500 167 155 807
The projects will be financed out of the proceeds from property sales and existing bank facilities.
Southern African property sales
Vukile concluded property sales during the year of R138 million, which supported our strategy to focus on a
low-risk, high-quality portfolio of retail properties.
Sales
price Yield* Dates of
R000 % sale
Hillcrest Richdens Shopping Centre 138 000 9.8 29 March 2019
138 000 9.8
* Based on year one net operating income forecast.
4. Spanish property portfolio overview
The Spanish property portfolio at 31 March 2019 consisted of 17 properties with a total value of
€916.5 million and GLA of 317 106m2, with an average value of €53.9 million per property.
The geographical distribution of the Spanish portfolio is indicated in the table below. Some 87% of the gross
income comes from Andalucia, Extremadura, Castilla Leon and Com. Valenciana.
Geographic portfolio
Total
portfolio
% of rental income %
Andalucia 44
Extremadura 22
Castilla Leon 11
Com. Valenciana 10
Madrid 8
Asturias 4
Murcia 1
Based on value, 97% of the Spanish portfolio is in the retail sector with 3% in the office sector.
The tenant profile is indicated in the table below:
Total
Retail portfolio
Tenant profile % %
% of GLA
Large national and international tenants 94 89
Local tenants (83 tenants) 6 11
Large national and international tenants account for 89% of tenants by GLA, and 90% of tenants by rent.
The portfolio has low tenant concentration risk with the top 10 tenants accounting for 28.3% of total rent
and 41.8% of total GLA. Based on rent, Media Markt is the single largest tenant, with 4.0% of total rent
(5.3% of total GLA), with Zara the second largest at 4.0% of total rent (3.8% of total GLA).
List of properties
External
value at
Rentable 31 March
area 2019 % Valuation
Property Location m2 €m of total €/m2
El Faro Extremadura 43 423 162.4 17.7 3 740
Bahia Sur Andalucia 24 789 120.2 13.1 4 849
Los Arcos Andalucia 17 906 118.2 12.9 6 601
Granaita Retail Park Andalucia 54 367 113.7 12.4 2 091
Vallsur Castilla Leon 35 211 92.8 10.1 2 636
Habaneras Com. Valenciana 24 158 88.8 9.7 3 676
Parque Oeste Madrid 13 604 51.6 5.6 3 793
Parque Principado Asturias 16 246 34.6 3.8 2 130
Marismas del Polvorin Andalucia 18 079 28.4 3.1 1 571
Edificio Alcobendas Madrid 11 046 20.6 2.3 1 865
La Heredad Extremadura 13 447 20.1 2.2 1 495
La Serena Extremadura 12 405 16.1 1.8 1 298
Pinatar Park Murcia 10 637 11.8 1.3 1 109
Motril Retail Park Andalucia 5 559 8.9 1.0 1 601
Mejostilla Extremadura 7 281 8.9 1.0 1 222
Ciudad del Transporte Com. Valenciana 3 250 7.4 0.8 2 277
Edificio Bollullos Andalucia 5 698 5.7 0.6 1 000
El Faro Development Extremadura 3.3 0.4
Los Arcos Development Andalucia 3.0 0.2
Total 317 106 916.5 100.0 2 890
Valuation of the Spanish portfolio
During the year all the properties were valued by external valuers, Colliers International.
Expiry profile
The expiry profile as a percentage of contractual rent is shown below:
The Spanish properties' lease expiry profile reflects that 9%, based on rent, of the leases are due for renewal
in the 2020 financial year. Approximately 47% of leases are due to expire in 2029 and beyond.
Beyond
March March March March March March March March March March March
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2029
Lease expiry % % % % % % % % % % %
Lease expiry % of rent
Rent 9 5 4 7 7 6 3 4 8 4 43
Cumulative as at
March 2019 9 14 18 25 32 38 41 45 53 57 100
Cumulative as at
March 2018 2 3 4 4 5 5 5 7 15 15 100
Beyond
March March March March March March March March March March March
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2029
Break profile* % % % % % % % % % % %
Lease expiry % of rent
Rent 25 20 12 17 6 6 2 - 6 - 6
Cumulative as at
March 2019 25 45 57 74 80 86 88 88 94 94 100
Cumulative as at
March 2018 23 46 58 76 79 82 84 84 84 84 100
* Break profile is the date upon which the tenant has an option to terminate the lease prior to the expiry date.
Vacancy profile
The vacancy per sector (measured as a percentage of GLA) is indicated in the table below:
March March
2019 2018
Vacancies (% of GLA) % %
Shopping centre 3.6
Retail park 1.0 3.2
Offices - -
Total 2.1 2.8
The shopping centres were acquired during the year, and did not carry vacancies in 2018. The total retail
vacancies are 2.3% at year-end.
GLA summary GLA m2
Balance at 31 March 2018 172 974
GLA adjustments (1 355)
Disposals -
Acquisitions and extensions 145 487
Balance at 31 March 2019 317 106
Vacancy reconciliation Area m2 %
Balance at 31 March 2018 4 924 2.8
Vacancy on new acquisitions 5 279 3.6
Vacancy let (3 407)
Balance at 31 March 2019 6 796 2.1
Base rentals (excluding recoveries)
The weighted average monthly base rental rates per sector, between 31 March 2018 and 31 March 2019, are set out
in the table below:
March March Escalation
Weighted average base rentals (€/m2) excluding recoveries 2019 2018 %
Shopping centre 19.98 -
Retail park 9.32 9.24 0.9
Offices 9.32 9.05 3.0
Total 14.14 9.22 53.4
The average retail rental rate increased from €9.24/m2 to €14.41/m2 due to the acquisition of the five
shopping centres during the year.
Spain property portfolio - developments, acquisitions and sales
Acquisitions
In May 2018, Castellana acquired the Habaneras shopping centre for €83.8 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 €480.6 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 through Spain.
The five shopping centres referred to above have a WALE of 10 years. The total GLA of the shopping centres
is 145 487m2 and 96% 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 €19.98 per m2 across the centres is at the lower end of the market rental which is
between €15 and €32 per m2, which is well positioned for income growth.
Weighted
average Purchase
GLA rental price of the
Province m2 per m2 property €m*
El Faro Extremadura 43 423 17.10 157.36
Bahia Sur Andalucia 24 789 25.40 120.92
Los Arcos Andalucia 17 906 32.76 110.70
Vallsur Castilla Leon 35 211 14.58 91.61
Habaneras Com. Valenciana 24 158 18.33 83.81
Total 145 487 19.98 564.40
* Including transaction costs.
Redevelopment projects completed
Granaita Retail Park
Kinepolis Retail Park, Kinepolis Leisure Centre and Alameda shopping centre were merged and rebranded as a
single shopping node - Granaita Retail Park. Granaita, as the largest retail and leisure park in the Granada
region, offers a wide range of leisure, fashion, food and beverage to the local community. Granaita has
emerged as a unique and powerful brand among customers.
In March 2019, Castellana completed and launched the newly redeveloped Granaita Leisure Centre in Granada.
The project achieved and surpassed the following objectives:
- Interior was upgraded and natural light was increased.
- Installation of a customised high-visibility children's play area.
- New outdoor terraces were opened up to take advantage of the favourable Spanish climate.
- Improvement of green areas.
- Improvement of tenant mix.
In its entirety, the project capital expenditure was c.€5.4 million. The project will add an additional
c.€600 000 to the net property income portfolio on an annualised stabilised basis resulting in a yield
on capex of 10.9%.
The major upgrade, merger and rebranding responds to shopper and retail demand. It builds on the centre's
excellent trading metrics and unlocks further income enhancement.
Prospects for Castellana
Castellana's retail portfolio is well placed to deliver sustainable returns. Castellana's strategy is to
keep growing the portfolio through organic growth, value-added asset management and accretive acquisitions.
The Spanish retail real estate market is forecast to be less active this year as opportunistic investors
have turned to other asset classes; as a result, many opportunities are coming to Castellana as the
acquisitions pipeline shows. Our investment strategy will remain focused on enhancing and adding value to
our portfolio of low-risk, dominant retail assets that produce predictable and sustainable income streams.
While capital values and yields are reaching cycle peak levels, we expect rentals to start growing at better
rates as spending and confidence return to the Spanish population.
We believe the time is right for a different approach to soft services, repairs and maintenance in the Spanish
shopping centre environment. We are seeking to develop innovative solutions that offer us better value in
the year ahead.
We do believe that within the near future we will position Castellana at the top end of the market with our
quality retail portfolio and its integrated opportunities for value enhancement.
5. Vukile Academy
The Vukile Academy is a skills development, mentorship and transformation platform which was launched
in January 2019.
The Academy was initiated by Vukile to create a meaningful and impactful contribution towards reducing
the skills gap in the property sector and to also create economic transformation.
The Academy is designed as a three-tiered programme which focuses on the following areas:
- The Vukile Bursary Fund - The Vukile Bursary Fund is a tertiary education-targeted fund. On an annual
basis 50 plus students are identified and awarded bursaries for studies in property/real estate-related
fields. The students are in their third year or honours year level of studies. The Bursary Fund is in
partnership with industry organisations or the tertiary institutions directly. We have partnered with
SAPOA, WPN, SAIBPP as well as Wits, UP, UKZN and UJ. Vukile has invested in excess of R5 million in
the past financial year on our bursary programme.
- The Vukile Internship Programme - On an annual basis, Vukile undertakes a rigorous and transparent
selection process to identify and offer 10 deserving candidates a position in the Vukile Internship
Programme. The programme is designed as an integration platform into the Real professional world for
10 graduates from our Bursary Fund. The industry leading programme is designed with curriculum experts
and professionals from the industry and tertiary institutions like GIBS and UP. It runs over 11 modules.
A personal mastery programme forms a crucial element of the programme, for a holistic integration process.
The essence of the internship programme is to impart the Vukile Brand DNA to our candidates. They are
each offered a fixed-term employment contract for a period of one year.
- The Entrepreneur Property Development Hub - An incubator programme which is designed to assist black
professionals and entrepreneurs realise their dreams and vision of entering the property development
market. The developments are small to medium sized and generally located in underserviced areas of
South Africa. The entrepreneurs receive support and guidance from the Vukile Academy interns and the
full Vukile Property Fund team. Three projects have been identified located in Daveyton, Phuthaditjhaba
and Thokoza, these comprise two retail centres and one student accommodation development.
The Vukile Academy is our initiative to give back to our communities and South Africa as a whole.
We endeavour to uplift the lives of our people and create a better environment for all.
6. International expansion
In line with its focused strategy, Vukile has decided that for the short to medium term, its only international
expansion will be focused on Spain.
7. Prospects for the group
The Vukile business remains in very good shape; operationally and strategically. Our clearly focused retail
strategy in both South Africa and Spain is providing benefits in each of these markets as seen by the strong
operational metrics. In addition, at group level, the macro-economic benefits of diversification for South
African investors is evident. The business remains very well positioned for long-term sustainability.
In South Africa, while encouraged by the results of the recent elections, and remaining hopeful of much needed
political and economic change being effected, we still anticipate the short to medium-term economic conditions
to remain challenging overall. Against this backdrop, we believe that our assets are defensive and well
positioned in their markets, and should continue to weather the storm in the year ahead. Vukile continues
to look for accretive opportunities to invest in the South African market as evidenced by the Rebosis
transaction currently under evaluation.
The Spanish economy is continuing to outperform the Eurozone, albeit at a slower pace. We are, however, very
encouraged by the operational performance of the business; specifically, the value add being created by our
asset management team. Castellana is well established in the market and continues to see very strong deal flow.
We are pleased with the progress we have made in reducing our LTV from 42% at the time of the acquisition of
the four shopping centres from Unibail-Rodamco-Westfields, to the current level of 37%. The balance sheet
remains strong with well diversified sources of funding. Vukile's interest cover ratio is significantly above
the covenant level at 6 times cover.
Assuming no material adverse change in trading conditions or large corporate failures, Vukile expects to
deliver growth in dividends of between 3% to 5% in the year ahead. Forecast rental income is based on contracted
escalations, market-related renewals and on the successful conclusion of certain transactions in progress
currently. Vukile is currently in negotiations, some at advanced stages, to recycle certain non-core assets
and redeploy the proceeds into core strategy business opportunities currently under evaluation. The forecast
for the year will be impacted by the closing and the timing of the various transactions. The forecast does not
take into account the Rebosis transaction. Once Vukile has greater clarity and certainty on the finalisation of
these deals and resultant impact on the forecast for FY2020, Vukile will update the market via a SENS announcement
in order to provide an updated guidance range for the year ahead.
This forecast has not been audited or reviewed by the group's auditors.
8. Subsequent events
Dividend declaration
In line with IAS 10 - Events after the Reporting Period, the declaration of the dividend occurred after the
end of the reporting period, resulting in a non-adjusting event that is not recognised in the financial statements.
The board approved a final dividend on 27 May 2019 of 103.37872 cents per share for the six months ended
31 March 2019 amounting to R988.5 million.
Issue of shares
On 11 April 2019 the company issued 35 264 483 shares at R19.85 in terms of an accelerated bookbuild under the
general authority to issue shares for cash.
Acquisition of shopping centres
South Africa
On 12 May 2019, Vukile announced the acquisition of three shopping centres known as Mdantsane City Shopping Centre,
Bloed Street Mall and Sunnypark Shopping Centre from Rebosis Property Fund Limited (Rebosis).
The purchase consideration will be an amount determined by applying a yield of 9.00% to the forecast net
property income (the forecast NOI) to be generated from the shopping centres for the 12-month period commencing
31 August 2019. The forecast NOI has been assumed to be R160 million which would translate into an aggregate
purchase price of R1.78 billion. The deal remains subject to funding with Vukile prepared to take on no more
than 25% of debt to fund the acquisition.
Vukile will acquire the shopping centres with effect from the transfer date, which is anticipated to be
31 August 2019. The purchase consideration will be settled in cash and will be discharged on the transfer
date.
The acquisition is still subject to a number of outstanding conditions precedent, including inter alia the
completion by Vukile of a comprehensive due diligence investigation in respect of the shopping centres,
approval of the Competition Authority, the securing by Rebosis of any necessary shareholder approvals
required for it to dispose of the shopping centres, the securing by Vukile of shareholder approval to
undertake the vendor consideration placement and the successful conclusion of the vendor consideration
placement in respect of at least 75% of the purchase price at a pricing and on terms acceptable to Vukile.
The acquisition is a non-adjusting event that is not recognised in the financial statements.
Spain
On 24 May 2019, Castellana Properties SOCIMI announced the purchase of two El Corte Ingles (ECI) units
in Bahia Sur and Los Arcos for a total purchase consideration of €38.4 million (including estimated
transaction costs), and asset management initiatives incorporating related capex upgrade projects in
Bahia Sur, Los Arcos and El Faro for a total capex budget of €28.49 million.
9. Declaration of a cash dividend
Notice is hereby given of a gross dividend amounting to 103.37872 cents per share out of distributable
income for the six-month period to 31 March 2019. Vukile will not be providing shareholders with the
option to elect (in respect of all or part of their holding) a dividend reinvestment (DRIP) for this
reporting period.
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 103.37872 cents per share meets the requirements of a "qualifying distribution" for the
purposes of section 25BB of the Income Tax Act (a qualifying distribution) with the result that:
- dividends received by South African resident Vukile shareholders must be included in the gross income
of such shareholders (as a non-exempt dividend in terms of section 10(1)(k)(i)(aa) of the Income Tax Act),
with the effect that the dividends are taxable as income in the hands of the Vukile shareholder. These
dividends are, however, exempt from dividends withholding tax, provided that the South African resident
shareholders provided the following forms to their CSDP or broker, as the case may be, in respect of
uncertificated shares, or the company, in respect of certificated shares:
- a declaration that the distribution is exempt from dividends tax; and
- a written undertaking to inform the CSDP, broker or the company, as the case may be, should the circumstances
affecting the exemption change or the beneficial owner cease to be the beneficial owner;
both in the form prescribed by the Commissioner for the South African Revenue Service. Shareholders are
advised to contact their CSDP, broker or the company, as the case may be, to arrange for the abovementioned
documents to be submitted prior to payment of the distribution, if such documents have not already
been submitted.
- dividends received by non-resident Vukile shareholders will not be taxable as income and instead will
be treated as ordinary dividends but which are exempt in terms of the usual dividend exemptions per
section 10(1)(k) of the Income Tax Act. It should be noted that dividends received by non-residents are
subject to dividends withholding tax at a rate of 20% unless the rate is reduced in terms of any
applicable agreement for the avoidance of double taxation (DTA) between South Africa and the country of
residence of the shareholder. Assuming dividends withholding tax will be withheld at a rate of 20%, the
net distribution amount due to non-resident shareholders is 82.70298 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
abovementioned documents to be submitted prior to payment of the distribution if such documents have
not already been submitted, if applicable.
Shareholders are further advised that:
- the issued capital of Vukile is 956 226 628 shares of one cent each at 29 May 2019, being the declaration
date; and
- Vukile's tax reference number is 9331/617/14/3.
This cash dividend 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.
The salient dates relating to the cash dividend are as follows:
Salient dates and times 2019
Last day to trade cum dividend Tuesday, 18 June
Shares trade ex dividend Wednesday, 19 June
Record date Friday, 21 June
Payment date Monday, 24 June
Notes:
1. Shares may not be dematerialised or rematerialised between Wednesday, 19 June 2019 and Friday,
21 June 2019, both days inclusive.
2. Payment of the distribution will be made to shareholders on Monday, 24 June 2019. In respect of
dematerialised shareholders, the distribution will be transferred to CSDP/broker accounts on
Monday, 24 June 2019. Certificated shareholders dividend payment will be paid to certificated
shareholders bank accounts on or about Monday, 24 June 2019.
10. Changes to board of directors
Two property stalwarts in Vukile's team retire at the end of June 2019, our FD Mike Potts and MD of South Africa
Ina Lopion. Mike will stay with the group as a non-executive director of Castellana and serve on its audit
committee. Ina is intending to use her exceptional experience and talents to build a career as an executive
coach and will continue her connection with Vukile by taking on a coaching role with some of our top senior
talent as well as playing a mentorship role within the Vukile Academy. We would like to take the opportunity
to thank Mike and Ina for their immeasurable contributions to Vukile's success over an extended period
of 15 years.
Vukile has appointed Laurence Cohen as its new CFO. Laurence, who is widely respected for his extensive
experience in the listed property sector, joined the team on 1 March 2019 as CFO designate. He will succeed
Mike and be appointed to the Vukile board of directors on 1 July 2019.
Itumeleng (Itu) Mothibeli, director of Asset Management will succeed Ina as MD of South Africa and will be
appointed to the board on 1 July 2019. Itu has been with Vukile since 2012 and has developed into an
exceptional talent whom we are confident will continue to grow the South African business into the future.
Both Mike and Ina have mentored our next generation of leaders, who are already up-to-speed with Vukile's
strategic imperatives and systems, and will advance Vukile seamlessly.
11. Basis of preparation
The summarised consolidated financial statements for the year ended 31 March 2019, and comparative information,
have been prepared in accordance with, and containing the information required by, International Financial
Reporting Standards (IFRS), 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, IAS 34 and relevant sections of the South African Companies Act.
Except for the amendments adopted as set out below, all accounting policies applied by the group in the
preparation of these summarised consolidated financial statements are consistent with those applied by the
group in its consolidated financial statements as at and for the year ended 31 March 2018. The group has
adopted the following amendments to standards which were effective for the first time for the financial
period commencing 1 April 2018:
- Amendments to IAS 40 - Investment Properties
- IFRS 9 - Financial Instruments
- IFRS 15 - Revenue from Contracts with Customers
- Amendments to IFRS 2 - Share-based Payments
- International Financial Reporting Interpretations Committee (IFRIC) 22 - Foreign Currency Transactions
and Advance Considerations
Based on management's assessment of these amendments, the only material impact identified on the financial
statements relates to IFRS 9.
These statements, which comprise the statement of financial position at 31 March 2019, the statement of
comprehensive income, the statement of changes in equity and the statement of cash flows for the 12 months
then ended, are extracted from audited information, but is itself not audited. The annual financial
statements were audited by PricewaterhouseCoopers Inc., who expressed an unqualified opinion thereon.
The auditor's report does not necessarily cover all of the information included in this announcement.
Shareholders are therefore advised that, in order to obtain a full understanding of the nature of the
auditor's work, they should obtain a copy of the audit report together with the accompanying financial
information from the registered office of the company situated at 4th Floor, 104 Oxford Road,
Houghton Estate.
The directors take full responsibility for the preparation of this report and that the financial information
has been correctly extracted from the underlying financial statements.
This report was compiled under the supervision of Michael John Potts CA(SA), the financial director of
the company.
The directors are not aware of any matters or circumstances arising subsequent to 31 March 2019 that require
any additional disclosure or adjustment to the financial statements and which are not disclosed
in this announcement.
On behalf of the board
N Payne LG Rapp
Chairman Chief executive officer
Houghton Estate
29 May 2019
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 March 2019
2019 2018
GROUP R000 R000
ASSETS
Non-current assets 32 678 563 22 028 749
Investment properties including straight-line rental adjustments 29 334 373 18 821 251
Investment properties 29 517 796 19 102 209
Investment properties under development 163 250 54 476
Total investment properties 29 681 046 19 156 685
Straight-line rental income adjustment (346 673) (335 434)
Other non-current assets 3 344 190 3 207 498
Straight-line rental income asset 346 673 335 434
Investments in associates at fair value 1 296 737 1 384 645
Investment in associate equity accounted 1 302 925 1 199 292
Property, plant, equipment and intangible assets 43 370 75 342
Executive share scheme financial asset 27 822 34 099
Derivative financial instruments 42 291 26 039
Long-term loans granted 270 709 103 672
Deferred taxation assets 13 663 48 975
Current assets 2 447 338 1 298 393
Trade and other receivables 281 380 186 743
Derivative financial instruments 10 333 -
Current taxation assets 3 155 7 290
Cash and cash equivalents 1 136 250 1 093 860
Non-current assets held for sale 1 016 220 10 500
Total assets 35 125 901 23 327 142
EQUITY AND LIABILITIES
Equity attributable to owners of the parent 18 655 690 15 770 080
Stated capital 12 142 017 9 527 445
Other components of equity 5 888 689 5 737 852
Retained earnings 624 984 504 783
Non-controlling interest 2 300 320 81 311
Non-current liabilities 12 035 161 5 484 980
Interest-bearing borrowings 11 547 551 5 346 371
Derivative financial instruments 480 350 131 304
Deferred taxation liabilities 7 260 7 305
Current liabilities 2 134 730 1 990 771
Trade and other payables 641 225 428 733
Short-term portion of interest-bearing borrowings 1 430 736 1 554 359
Derivative financial instruments 60 415 175
Current taxation liabilities 2 354 7 504
Total equity and liabilities 35 125 901 23 327 142
SUMMARISED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
for the year ended 31 March 2019
2019 2018
GROUP R000 R000
Property revenue 2 806 484 2 014 966
Straight-line rental income accrual 28 506 5 401
Gross property revenue 2 834 990 2 020 367
Property expenses (932 183) (705 891)
Net profit from property operations 1 902 807 1 314 476
Corporate and administrative expenses (199 371) (127 474)
Total investment and other income 344 815 323 255
Investment and other income 134 083 150 813
Finance income 47 658 78 566
Net interest from cross-currency interest rate swaps 163 074 93 876
Fair value movement on non-designated portion of cross-currency
interest rate swaps 47 603 -
Operating profit before finance costs 2 095 854 1 510 257
Finance costs (509 749) (367 808)
Operating profit after finance costs 1 586 105 1 142 449
(Loss)/profit on sale of investment properties (6 368) 13 405
(Loss)/profit on sale of furniture and equipment (18) 144
Fair value loss on associates at fair value (87 908) (16 411)
Fair value movement of derivative financial instruments (1 581) 7 408
Cost of terminating derivative financial instrument - (3 250)
Executive share scheme financial asset - current period loss (28 946) -
Foreign exchange (loss)/profit (65 912) 59 936
Restructuring fee on associate (815) -
Impairment of goodwill (48 218) -
Loss on sale of listed property securities - (26 240)
Fair value loss on net settled derivatives (208 104) -
Profit before changes in fair value of investment property 1 138 235 1 177 441
Fair value adjustments 775 076 1 149 988
Gross change in fair value of investment properties 803 582 1 155 389
Straight-line rental income adjustment (28 506) (5 401)
Profit before equity-accounted investment 1 913 311 2 327 429
Share of income from associate 53 585 95 485
Profit before taxation 1 966 896 2 422 914
Taxation (18 427) (10 668)
Profit for the year 1 948 469 2 412 246
Attributable to owners of the parent 1 709 426 2 401 943
Attributable to non-controlling interest 239 043 10 303
Other comprehensive income
Items that will be reclassified to profit or loss
Foreign currency translation reserve 36 348 (69 047)
Foreign currency translation reserve: associates 140 220 (7 826)
Foreign currency translation reserve: subsidiaries (103 872) (61 221)
Cash flow hedges (24 825) (60 202)
Deferred tax on hedging instruments (34 720) -
Executive share scheme financial assets - prior year losses - (17 610)
Other comprehensive loss for the year (23 197) (146 859)
Total comprehensive income for the year 1 925 272 2 265 387
Attributable to owners of the parent 1 604 158 2 254 319
Attributable to non-controlling interest 321 114 11 068
Number of shares in issue at basic and diluted earnings per share (cents) 199.05 320.65
Number of shares in issue at 31 March 920 962 145 784 766 367
Weighted average number of shares in issue 858 774 136 749 084 702
RECONCILIATION OF EARNINGS TO HEADLINE EARNINGS
for the year ended 31 March 2019
2019 2018
Cents Cents
R000 per share R000 per share
Profit attributable to owners of the parent 1 709 426 199.05 2 401 943 320.65
Earnings and diluted earnings 1 709 426 199.05 2 401 943 320.65
Change in fair value of investment properties (666 843) (77.65) (1 148 906) (153.37)
(net of allocation to non-controlling interest)
Impairment of goodwill 48 218 5.61 - -
Loss/(profit) on sale of investment properties 6 368 0.74 (13 405) (1.79)
Loss/(profit) on sale of furniture, fittings and
computer equipment 18 - (144) (0.02)
Remeasurement included in equity-accounted
earnings of associate (40 422) (4.71) (10 267) (1.37)
Headline and diluted headline earnings 1 056 765 123.04 1 229 221 164.10
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOW
for the year ended 31 March 2019
2019 2018
GROUP R000 R000
Cash flow from operating activities 1 785 694 1 333 611
Cash flow from investing activities (7 361 885) (4 664 679)
Cash flow from financing activities 5 616 823 3 096 868
Net increase/(decrease) in cash and cash equivalents 40 632 (234 200)
Foreign currency movement in cash 1 758 (1 885)
Cash and cash equivalents at the beginning of the year 1 093 860 1 329 945
Cash and cash equivalents at the end of the year 1 136 250 1 093 860
Major items included in the items above:
2019 2018
GROUP R000 R000
Cash flow from operating activities
Profit before taxation 1 966 896 2 422 914
Adjustments (266 204) (1 216 409)
Cash flow from investing activities
Acquisition and improvements of investment properties (9 574 280) (4 703 030)
Equity contributed from non-controlling interest 1 827 741 -
Cash flow from financing activities
Interest-bearing borrowings advanced 6 894 960 5 857 327
Interest-bearing borrowings repaid (1 891 575) (2 762 399)
Proceeds from issue of share capital 2 614 572 1 556 631
Finance costs paid (460 995) (352 990)
Dividends paid (1 518 404) (1 180 331)
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2019
Non-
Other Shareholders' controlling
Stated components Retained interest interest
capital of equity earnings Total (NCI) Total
R000 R000 R000 R000 R000 R000
Balance at 31 March 2017 7 970 814 4 681 806 458 805 13 111 425 73 367 13 184 792
Issue of share capital 1 556 631 - - 1 556 631 - 1 556 631
Dividend distribution - - (1 176 155) (1 176 155) (2 741) (1 178 896)
9 527 445 4 681 806 (717 350) 13 491 901 70 626 13 562 527
Profit for the year - - 2 401 943 2 401 943 10 303 2 412 246
Change in fair value of
investment properties - 1 155 389 (1 155 389) - - -
Change in fair value
of investment
properties attributable to
non-controlling interest - (6 486) 6 486 - - -
Share-based remuneration - 21 077 - 21 077 - 21 077
Deferred taxation
on change in fair
value of derivatives - (2 241) - (2 241) - (2 241)
Transfer to
non-distributable reserves -
currency revaluation - 59 936 (59 936) - - -
Transfer from
non-distributable reserve - (4 498) 12 835 8 337 - 8 337
Share issue expenses
of a subsidiary - (3 637) - (3 637) (59) (3 696)
Change in shareholding
of a subsidiary - 324 - 324 (324) -
Legal reserve transfer
- foreign subsidiary - 217 (217) - - -
Revaluation of
equity investments - (16 411) 16 411 - - -
Other comprehensive loss
Currency loss on
translation of investment
in foreign entities - (70 129) - (70 129) 803 (69 326)
Currency loss on translation
of goodwill - 279 - 279 - 279
Revaluation of available-for-sale
financial asset - (17 610) - (17 610) - (17 610)
Revaluation of cash flow hedges - (90 737) - (90 737) (38) (90 775)
Deferred taxation on
change in fair value of
cash flow hedges - 30 573 - 30 573 - 30 573
Balance at 31 March 2018 9 527 445 5 737 852 504 783 15 770 080 81 311 15 851 391
Initial application of IFRS 9 - 113 152 (83 139) 30 013 326 30 339
Lease receivables:
impairment provision - - 8 342 8 342 55 8 397
Deferred tax on above - - (1 752) (1 752) (11) (1 763)
Executive share scheme: change
in classification - 113 152 (113 152) - - -
Borrowings: non-substantial loan
modification - - 23 423 23 423 282 23 705
Issue of share capital 2 614 572 - - 2 614 572 1 944 877 4 559 449
Dividend distribution - - (1 456 219) (1 456 219) (62 185) (1 518 404)
2 142 017 5 851 004 (1 034 575) 16 958 446 1 964 329 18 922 775
Profit for the year - - 1 709 426 1 709 426 239 043 1 948 469
Transfer to
non-distributable reserve - 221 525 (221 525) - 53 53
Share issue expenses
of a subsidiary - (2 315) - (2 315) (122 372) (124 687)
Change in ownership
recognised in equity - (106 969) - (106 969) 106 969 -
Subsidiary share swap - - 171 658 171 658 37 934 209 592
Equity-settled share scheme - 23 005 - 23 005 - 23 005
Other comprehensive loss
Foreign currency
translation reserve - (45 723) - (45 723) 82 071 36 348
Cash flow hedges - (17 118) - (17 118) (7 707) (24 825)
Deferred tax on
hedging instruments - (34 720) - (34 720) - (34 720)
Balance at 31 March 2019 2 142 017 5 888 689 624 984 18 655 690 2 300 320 20 956 010
SUMMARISED OPERATING SEGMENTS REPORTING
for the year ended 31 March 2019
Southern Africa Spain
Retail Other Total Retail Other Total Grand
GROUP R000 R000 R000 R000 R000 R000 total
Group income for the year
ended 31 March 2019
Property revenue from
external customers(i) 1 348 238 140 686 1 488 924 668 327 29 653 697 980 2 186 904
Straight-line rental
income accrual 25 937 2 706 28 643 (137) - (137) 28 506
1 374 175 143 392 1 517 567 668 190 29 653 697 843 2 215 410
Property expenses
(net of recoveries)(i) (277 689) (5 548) (283 237) (29 345) (21) (29 366) (312 603)
Profit from property operations 1 096 486 137 844 1 234 330 638 845 29 632 668 477 1 902 807
Corporate and
administrative expenses (110 737) (11 555) (122 292) (73 804) (3 275) (77 079) (199 371)
Investment and other income 119 920 12 513 132 433 1 650 - 1 650 134 083
Finance income 13 325 34 327 47 652 6 - 6 47 658
Fair value movement on
non-designated portion of CCIRS 43 511 4 092 47 603 - - - 47 603
Net interest from CCIRS 149 057 14 017 163 074 - - - 163 074
Operating profit 1 311 562 191 238 1 502 800 566 697 (26 357) 593 054 2 095 854
(i) The property revenue and property expense have been reflected net of recoveries. The audited consolidated
statement of profit or loss reflects the gross property revenue and gross property expenses.
Southern Africa Spain
Retail Other Total Retail Other Total Grand
GROUP R000 R000 R000 R000 R000 R000 total
Group statement of financial
position at 31 March 2019
Assets
Non-current assets 13 525 803 4 250 415 17 776 218 13 821 029 1 081 316 14 902 345 32 678 563
Investment properties
including straight-line
rental adjustments 13 208 928 1 242 106 14 451 034 13 821 029 1 062 310 14 883 339 29 334 373
Investment properties 13 362 553 1 271 904 14 634 457 13 821 029 1 062 310 14 883 339 29 517 796
Investment property
under development 163 250 - 163 250 - - - 163 250
Total investment properties 13 525 803 1 271 904 14 797 707 13 821 029 1 062 310 14 883 339 29 681 046
Straight-line rental
income adjustment (316 875) (29 798) (346 673) - - - (346 673)
Other non-current assets 316 875 3 008 309 3 325 184 - 19 006 19 006 3 344 190
Straight-line rental
income asset 316 875 29 798 346 673 - - - 346 673
Investments in associates
at fair value - 1 296 737 1 296 737 - - - 1 296 737
Investment in associate
equity accounted - 1 302 925 1 302 925 - - - 1 302 925
Property, plant, equipment and
intangible assets - 25 210 25 210 - 18 160 18 160 43 370
Executive share
scheme financial asset - 27 822 27 822 - - - 27 822
Derivative financial instruments - 42 291 42 291 - - - 42 291
Long-term loans granted - 270 709 270 709 - - - 270 709
Deferred tax assets - 12 817 12 817 - 846 846 13 663
Current assets 1 182 647 562 412 1 745 059 694 488 7 791 702 279 2 447 338
Trade and other receivables 108 208 54 526 162 734 118 646 - 118 646 281 380
Derivative financial instruments - 10 333 10 333 - - - 10 333
Current taxation - 6 6 - 3 149 3 149 3 155
Cash and cash equivalents 58 219 497 547 555 766 575 842 4 642 580 484 1 136 250
Non-current assets held for sale 1 016 220 - 1 016 220 - - - 1 016 220
Total assets 35 125 901
Equity and liabilities
Equity - - - - - - 20 956 010
Non-current liabilities - 4 464 422 4 464 422 7 570 739 - 7 570 739 12 035 161
Interest-bearing borrowings - 4 464 271 4 464 271 7 083 280 - 7 083 280 11 547 551
Derivative financial instruments - - - 480 350 - 480 350 480 350
Deferred tax liabilities - 151 151 7 109 - 7 109 7 260
Current liabilities 240 065 1 530 262 1 773 036 311 035 52 660 363 694 2 134 730
Trade and other payables 240 065 74 903 317 677 272 889 52 660 325 548 641 225
Short-term portion of
interest-bearing borrowings - 1 430 736 1 430 736 - - - 1 430 736
Derivative financial instruments - 22 269 22 269 38 146 - 38 146 60 415
Current taxation liabilities - 2 354 2 354 - - - 2 354
Total equity and liabilities 35 125 901
Southern Africa Spain
United Total
Retail Other Total Kingdom Retail Other Total group
GROUP R000 R000 R000 R000 R000 R000 R000 R000
Group income for the year
ended 31 March 2018
Property revenue(i) 1 232 435 124 674 1 357 109 - 177 965 26 724 204 689 1 561 798
Straight-line rental
income accrual 4 780 484 5 264 - 137 - 137 5 401
1 237 215 125 158 1 362 373 - 178 102 26 724 204 826 1 567 199
Property expenses
(net of recoveries)(i) (213 875) (7 952) (221 827) - (27 521) (3 375) (30 896) (252 723)
Profit from property
operations 1 023 340 117 206 1 140 546 - 150 581 23 349 173 930 1 314 476
Profit from associate - - - 95 485 - - - 95 485
(i) The property revenue and property expense have been reflected net of recoveries. The audited consolidated
statement of profit or loss reflects the gross property revenue and gross property expenses.
Southern Africa Spain
United Total
Retail Other Total Kingdom Retail Other Total group
GROUP R000 R000 R000 R000 R000 R000 R000 R000
Group statement of
financial position
at 31 March 2018
ASSETS
Investment properties 13 328 678 1 249 288 14 577 966 - 4 113 957 375 256 4 489 213 19 067 179
Add: Lease commissions - - 35 030 - - - - 35 030
13 328 678 1 249 288 14 612 996 - 4 113 957 375 256 4 489 213 19 102 209
Goodwill 48 218 - 48 218 - - 15 070 15 070 63 288
Investment properties
held for sale - 10 500 10 500 - - - - 10 500
13 376 896 1 259 788 14 671 714 - 4 113 957 390 326 4 504 283 19 175 997
Add:
Investment property
under development - - 54 476 - - - - 54 476
Equity investments - - 1 384 645 - - - - 1 384 645
Investment in associate - - - 1 199 292 - - - 1 199 292
Furniture, fittings,
computer equipment
and intangible asset - - 11 202 - - - 852 12 054
Available-for-sale
financial asset - - 34 099 - - - - 34 099
Derivative
financial instruments 23 808 2 231 26 039 - - - - 26 039
Loans receivable - - 103 672 - - - - 103 672
Deferred taxation assets - - 48 975 - - - - 48 975
Trade and other
receivables - - 166 133 - - - 20 610 186 743
Taxation refundable - 6 - - - 7 284 7 290
Cash and cash equivalents - - 826 371 - - - 267 489 1 093 860
Total assets 23 327 142
EQUITY AND LIABILITIES
Stated capital 8 710 972 816 473 9 527 445 - - - - 9 527 445
Interest-bearing
borrowings 4 437 744 415 947 4 853 691 - 2 047 039 - 2 047 039 6 900 730
13 148 716 1 232 420 14 381 136 - 2 047 039 - 2 047 039 16 428 175
Add: Excluded items
Other components of
equity and
retained earnings - - 4 146 104 - - - 2 096 531 6 242 635
Non-controlling
interest - - 47 990 - - - - 81 311
Derivative
financial
instruments 82 528 45 885 128 413 - 3 066 - 3 066 131 479
Deferred taxation
liabilities - - 934 - - - - 7 305
Trade and other
payables - - 339 325 - - - 89 408 428 733
Current taxation
liabilities - - 7 347 - - - 157 7 504
Total equity
and liabilities 23 327 142
CALCULATION OF DISTRIBUTABLE EARNINGS
31 March 31 March
2019 2018 Variance
R000 R000 %
Property revenue 2 186 904 1 561 798 40.02
Property expenses (net of recoveries) (312 603) (252 723) (23.69)
Net profit from property operations per segmental report excluding 1 874 301 1 309 075 43.18
straight-line rental income accrual
Corporate administration expenses (199 371) (127 474) (56.40)
Net interest from cross-currency interest rate swap 163 074 - 100.00
Investment and sundry income 181 741 323 255 (43.78)
Operating profit before finance costs 2 019 745 1 504 856 34.22
Finance costs (509 749) (367 808) (38.59)
Profit before equity-accounted income 1 509 996 1 137 048 32.80
Profit share of associate 53 585 95 485 (43.88)
Profit before taxation 1 563 581 1 232 533 26.86
Taxation (18 427) (10 668) (72.73)
Profit for the year 1 545 154 1 221 865 26.46
Costs of terminating interest rate swap - (3 250) 100.00
Net profit attributable to non-controlling interests (102 304) (10 303) (100.00)
Attributable to Vukile group 1 442 850 1 208 312 19.41
Non-IFRS adjustments 247 223 99 064 0.23
Shares issued cum dividend 125 399 35 019 100.00
Accrued dividends and cum dividend on shares acquired 60 036 44 940(1) 33.59
Dividends accrued on listed associate net of share of income 61 788 19 105 100.00
Available for distribution 1 690 073 1 307 376 29.27
Total dividend for the year (Rand) 1 690 073 1 301 734
Total dividend for the year (cents per share) 181.48 168.82
Number of shares in issue at 31 March 920 962 145 784 766 367
(1) Shares in Castellana subsidiaries, owning 11 retail parks, acquired cum dividend on 30 June 2017.
NOTES TO THE SUMMARISED FINANCIAL STATEMENTS
for the year ended 31 March 2019
Financial instruments
The financial assets and liabilities measured at fair value in the statement of financial position are grouped
into the fair value hierarchy as follows:
2019 2018
Level 1 Level 2 Level 3 Total Level 1 Level 2 Total
GROUP R000 R000 R000 R000 R000 R000 R000
Assets
Investments in associates
at fair value 1 296 737 - - 1 296 737 1 384 645 - 1 384 645
Executive share
scheme financial assets 72 439 - - 72 439 79 152 - 79 152
Derivative financial
instruments - 52 624 - 52 624 - 26 039 26 039
Total 1 369 176 52 624 - 1 421 800 1 463 797 26 039 1 489 836
Liabilities
Executive share scheme
financial liabilities - (44 617) - (44 617) - (45 053) (45 053)
Derivative financial
instruments - (316 430) (224 335) (540 765) - (131 479) (131 479)
Total - (361 047) (224 335) (585 382) - (176 532) (176 532)
Net fair value 1 369 176 (308 423) (224 335) 836 418 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.
Investments in associates at fair value
This comprises shares held in listed property companies at fair value which is determined by reference to quoted
prices at the reporting date.
Executive share scheme financial assets and liabilities
This comprises the long-term reimbursement right, which is legally offset by the long-term employee benefit
liability. This comprises equity-settled share-based long-term incentive reimbursement rights stated at fair
value. Fair value has been determined by reference to Vukile's quoted closing price at the reporting date
after deduction of executive and management rights.
Derivative financial instruments
Level 2 derivatives consist of interest rate swap contracts, cross-currency interest rate swaps and forward
exchange contracts. 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. Level 3 derivatives consist
of net settled derivatives and share warrants that have been valued using the Black Scholes option pricing
model.
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.
Fair value measurement of non-financial assets (investment properties)
The following table reflects the levels within the hierarchy of non-financial assets measured at fair
value at 31 March:
2019 2018
Recurring fair value Recurring fair value
measurements measurements
Level 3 Level 3
R000 R000
Investment properties 29 517 796 19 102 209
Investment properties under development 163 250 54 476
2019 2018
Non-recurring Non-recurring
fair value fair value
measurements measurements
Level 3 Level 3
R000 R000
Investment properties held for sale 1 001 672 10 500
There were no transfers in or out of level 3 in the reporting period under review.
As at 31 March 2019, the directors have valued the southern African property portfolio at R15.8 billion, and
an external valuer have valued the Spanish portfolio at R14.9 billion (2018: R11.8 billion and R7.3 billion
respectively). This includes assets classified as held for sale.
This is R11.5 billion or 60.08% higher than the group's valuation as at 31 March 2018.
The external valuations performed by Quadrant Properties (Pty) Ltd and Knight Frank (Pty) Ltd at
31 March 2019 on 51% of the southern African portfolio are in line with the directors' valuations.
The Spanish portfolio was valued by Colliers International.
The fair values of commercial buildings are estimated using an income approach which capitalises the
estimated rental income stream, net of projected operating costs, using a discount rate derived from
market yields. The estimated rental stream takes into account current occupancy levels, estimates of
future vacancy levels, the terms of in-place leases and expectations of rentals from future leases
over the remaining economic life of the buildings.
The most significant inputs are the discount rate and the reversionary capitalisation rate. The inputs
used in the valuations at 31 March were:
2019 2018
Reversionary Reversionary
Discount rate capitalisation rate Discount rate capitalisation rate
Weighted Weighted Weighted Weighted
Range average Range average Range average Range average
% % % % % % % %
Southern Africa 12.4 to 17.4 13.5 7.4 to 13.0 8.7 12.2 to 17.3 13.4 7.5 to 12.8 8.6
Spain 7 to 9.0 7.9 5 to 9.2 6 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).
The effect of a 25 basis point change to the base discount rate is as follows on the 31 March 2019 value
of the portfolio:
25 bps increase 25 bps decrease
Decreased Increased
Fair value fair value Decrease % fair value Increase %
R000 R000 R000 decrease R000 R000 increase
Southern Africa 15 501 000 15 050 000 (451 000) (2.91) 15 979 000 478 000 3.1
Decreased Increased
Fair value fair value Decrease % fair value Increase %
€000 €000 R000 decrease €000 R000 increase
Spain 916 470 899 945 (16 525) (1.8) 933 420 16 950 1.8
JSE sponsor: Java Capital
NSX sponsor: IJG Group, Windhoek, Namibia
Executive directors: LG Rapp (chief executive), MJ Potts (financial director),
HC Lopion (executive director: asset management), GS Moseneke
Non-executive directors: NG Payne (Chairman), PS Moyanga, SF Booysen, RD Mokate,
H Ntene, HM Serebro, B Ngonyama
Registered office: 4th Floor, 104 Oxford Road, Houghton Estate, 2198
Company secretary: J Neethling
Transfer secretaries: Link Market Services South Africa (Pty) Ltd, Braamfontein, Johannesburg
Investor relations: Instinctif Partners, The Firs 302, 3rd Floor, Corner Craddock Avenue
and Biermann Road, Rosebank,
Johannesburg, South Africa, Tel: +27 11 447 3030
Media relations: Marketing Concepts, 10th Floor, Fredman Towers, 13 Fredman Drive,
Sandton, Johannesburg, South
Africa, Tel: +27 11 783 0700, Fax: +27 11 783 3702
www.vukile.co.za
Date: 29/05/2019 08:02:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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