CORPORATE OVERVIEW

OUR STRATEGY

Vukile has developed a strategy aimed at creating and sustaining value over the short, medium and long term through operating a diversified fund which is overweight in the retail sector. Our strategy is underpinned by the achievement of the following critical success factors (CSFs).

Delivering on our stated strategy

During the year under review, Vukile made significant progress in achieving and delivering on its critical success factors as reflected in the table below.

  • Optimise short-term and long-term returns
    • Vukile is very well POSITIONED FOR FUTURE GROWTH
      • Stable, defensive Southern African retail portfolio with impressive operating metrics
      • Castellana well positioned for STRONG GROWTH IN THE SPANISH MARKET
      • Ability to scale Atlantic Leaf off a SOLID PORTFOLIO PLATFORM
    • Balance sheet management remains a CORE COMPETENCE to continue
      • to keep gearing below 40%
      • to hedge at least 75% of interest bearing debt
      • to hedge c.75% of foreign currency denominated income
    • Expect full year FY2018 dividends to growth by between 7% AND 8%
    • Early indications are that growth in FY2019 will be AT LEAST 8%
  • Grow the portfolio

    COMPLETED DEVELOPMENT

    Thavhani Mall, Thohoyandou

    • New regional mall in the heart of Thohoyandou, Limpopo, the largest development of its kind in the area
    • Caters to a high-growth node with over 87 000 households
    • The opening of the centre was a resounding success and incredibly well received by the local community who embraced the opening of the new mall
    • The centre is trading exceptionally well, with many retailers reporting first trade figures of double and even triple their initial targets

    COMPLETED REDEVELOPMENTs

    Phoenix Plaza, Kwazulu-Natal

    • Defensive spend to modernise Phoenix Plaza
    • The upgrade ensures that Phoenix Plaza remains the shopping destination of choice for its loyal customer base
    • The lighting of the mall has been significantly improved and bright new colours have been introduced to enhance its look and feel
    • The upgrade includes the addition of new public ablution facilities, the refurbishment of the facades and the upgrade of internal sections of the Mall

    Dobsonville Shopping Centre, Soweto

    • Upgraded the existing centre and expanded the total GLA to 26 655m²  
    • A new mall, food court and an improved tenant mix added to the centre. Tenants in the expansion include: Clicks, Foschini, Pick n Pay, PQ Clothing, PEP Home and Legit
    • New & improved Tenants in existing mall – expansion of Mr. Price & Truworths, Exact, Identity, Sport Scene, Beaver Canoe and Food Lovers Market

    REDEVELOPMENT IN PROGRESS

    Maluti Crescent, Phuthaditjhaba

    • An innovative redevelopment that will transform the existing strip centre into a fully enclosed mall with three levels of parking
    • This major upgrade responds to shopper and retailer demand, and builds on the centre’s excellent trading metrics
    • Pick n Pay will be introduced as a second food anchor. The existing centre will continue to trade throughout the redevelopment process
    • Flanagan & Gerard have been appointed as development manager
  • Minimise cost of funding and refinance risk
    Improvement in cost ratios
     
  • Improve customer tenant focus

    Notable achievements:

    • Ongoing research in respect of lower LSM retail.
    • Continual engagement with major retailers and large office and industrial tenants.
    • On-going interaction and communication with shareholders and debt funders.
    • Strong relationships forged with property managers ensuring their alignment with Vukile’s strategy.
    • Significantly expanded leasing broker network as a result of broker incentive programmes.
  • BUILDING SUSTAINABLE RELATIONSHIPS IN ASSOCIATE COMPANIES

    Notable achievements:

    • Maintained strong relationships with property managers and stakeholders
    • Introduced the investment in Castellana (Spanish) into the Vukile indirect portfolio

    Fairvest

    • Strategically aligned to Vukile’s lower income retail focus but targeting smaller commuter centres
    • Strong hands-on management team that delivers on its promises
    • Continue to hold the stake but will be prepared to dilute to get more liquidity into share
    • Current investment is 3,1% of total portfolio value at 463 million

    Key stats

    • 34 retail properties valued at R1.36 billion
    • Vacancies of 4.4%
    • National tenants comprise 79% of the portfolio
    • Gearing as at 30 June 2015 of 19% of which 73% is fixed
    • As per managements market commentary aiming to grow F16 distributions by between 9% and 10%

    Atlantic leaf Strategy

    The way forward

    • Currently hold c.35% OF THE EQUITY
    • Happy with progress Atlantic Leaf management has made in building a SOLID, LOW RISK BASE of assets
    • Would now like to see INCREASED EXPANSION OPPORTUNITIES to leverage off the solid base
    • Continued investment in LOGISTICS, WAREHOUSING AND DISTRIBUTION assets
    • Would like Atlantic Leaf management to investigate RETAIL PARKS in more detail:
      • Long leases, with good covenants
      • Pricing seems attractive at 6.5% - 7.0%
      • Well positioned for omni-channel strategies
    • Actively driving strategy with Atlantic Leaf management and seeking to ADD VALUE AS A STRATEGIC SHAREHOLDER
    • Support Atlantic Leaf management exploring possibility of converting to a UK REIT
    • Atlantic Leaf management have provided forecast growth of between 5% AND 7% FOR FY2019
    • Atlantic Leaf Strategy

    Spanish strategy

    The platform is set

    • Castellana MANAGEMENT TEAM NOW ON BOARD
    • Approach is to “REPLICATE NOT INTEGRATE”
    • Post deal Implementation plan WELL ON SCHEDULE
    • Critical to our success is that we OPERATE AS LOCALS ON THE GROUND  
    • Plan to LIST CASTELLANA ON THE MAB by July 2018
    • FOCUSED ON THE RETAIL SECTOR but open minded to LONG LEASE LOGISTIC ASSETS
    • Currently seeing very GOOD DEAL FLOW; Castellana presence established in the retail park market
    • FUNDING IS IN PLACE for current acquisitions without need for Vukile to do an equity capital raise
    • Spanish RETAIL AND ECONOMIC FUNDAMENTALS remain POSITIVE
    • Expect Spain will be a MAJOR ENGINE OF GROWTH
    • Planning a SITE VISIT for the week of 5 – 9 MARCH 2018 (Contact Instinctif Partners)
  • Invest in our people

    Notable achievements:

    • Maintained strong workforce having more than 340 years’ experience in the property industry.
    • Stable and consistent workforce with staff turnover below 3.5%.
  • Transformation

    Notable achievements:

    • Appointment of Sedise Moseneke as an executive director.
    • Board representation aligned with property sector charter requirements.
    • Achieved Level 3 BEE rating