Integrated
Report

2019

Currently viewing: BUSINESS OVERVIEW/ Our strategy | Next: Chief financial officer's review (including financial resources)

Our strategy

Our strategy is implemented through our key drivers, after considering risks and opportunities, stakeholders' main requirements and our operating environment. Our performance is measured by KPIs.

Our remuneration policy, which includes our short-term incentive (STI) scheme and the performance conditions of our long-term incentive (LTI) scheme, supports our strategy. We design and calibrate the KPI targets of our STI and LTI schemes to ensure alignment with short-term and long-term value creation respectively, in line with our strategy. These targets have not been reviewed or reported on by our auditor.

Strategic matters

Achieving the discrete objectives under each strategic matter supports one or more of our key drivers. These are in turn all influenced by the availability, quality and affordability of our capitals. Our aim is to balance our use of the capitals, that is, to optimally allocate capital and where and when required, recycle capital, to achieve our objectives en route to our ultimate goal of sustainable income and capital growth.

Our strategic objectives span one to five years, setting out Attacq’s key short to medium-term goals.

Objectives   Measured by
1 To deliver a consistently great experience. To ensure all our stakeholders enjoy the necessary service and care, whatever their context or relationship with our organisation  
  • Year-on-year trading density growth
  • Low vacancy rate at reporting date
  • Low arrears as at reporting date
  • New business development
2 To realise the deliverables of Developments of Waterfall and turn the dream and vision of the precinct into a reality  
  • Development roll out (m2 pa)
  • Successful sale of residential units
3 To embed our focus on sustainability in all areas of our company. To ensure we operate in a way that respects our heritage, leaves a lasting legacy and enables generations to come  
  • Reduce our carbon footprint
  • Remain included in the FTSE/JSE Responsible Investment Index
  • Encourage transformation through B-BBEE levels and EE scores
     
SUSTAINABLE INCOME AND CAPITAL GROWTH    

Resource

To be a premier property company, we need to deliver sustainable income and capital growth. We continue to identify non-core properties in our South African portfolio as well as non-core investments across the group for disposal. We will redeploy this capital by repaying interest-bearing debt and funding our Developments at Waterfall.

Our focus as a REIT is on dividend per share (DPS) and dividend growth as benchmarking KPIs for the industry.

Strategic KPIs 2018
result
2019
target
2019
result
  Success
indicator
Short-term
target
  Medium to
long-term
target
FINANCIAL                
DPS (cents) 75.0 79.5 to 81.0 81.5   88.0 to 89.7   110.0% growth in DPS relative to identified peer group over a three-year period
Dividend growth (%) 7.5 to 9.5 10.1   8.0 to 10.0  

We focus on improving our interest cover ratio as this ratio is an indicator of the affordability of our debt. Lowering gearing levels is important in order to improve the interest cover ratio. We have set a goal of reducing gearing levels to below 35.0%.

Strategic KPIs 2018
result
2019
target
2019
result
  Success
indicator
Short-term
target
Medium to
long-term
target
FINANCIAL              
              Medium term >2.0;
Interest cover ratio (times) 1.78 >1.5 1.85   >1.85 long term >2.5
Gearing (maximum of (%)) 33.5 35.0 37.7   35.0 35.0
   

* Achieved as per our most recent certification based on FY19 results.

     
RETAIL AND MIXED-USE PRECINCTS    

Resource

First key driver: South African portfolio

We are focused on owning and managing dominating retail and mixed-use precincts in South Africa.

Our success is measured by trading density growth as evidence of our quality assets and property management skills.

Strategic KPI 2018
result
2019
target
2019
result
  Success
indicator
Short-term
target
Medium to
long-term
target
NON-FINANCIAL              
Trading density growth (%) 5.1 3.0 6.8   CPI linked CPI linked

Third key driver: Investment in MAS

We play an investment management role in this group. MAS achieved its guidance of 15.0% dividend growth for FY19 and provided guidance of 30.0% growth over the next three years ending FY22.

Fourth key driver: Rest of Africa retail investment

No further expansion will be made in this portfolio, except for operational requirements. We will continue to focus on optimising net income and asset value until we are able to exit this investment in an orderly manner.

   
     
DEVELOPMENTS AT WATERFALL    

Resource

Second key driver: Developments at Waterfall

Our unique value proposition is the development opportunity in Waterfall, comprising Waterfall City – an integrated city that works, and Waterfall Logistics Hub – Gauteng’s logistics hub of choice. We are focused on densifying Waterfall City through quality commercial and residential developments and building a green, smart city.

By setting ourselves development targets (roll-out and surplus), we ensure that we keep the development momentum already created in Waterfall while creating value for our shareholders.

Strategic KPIs 2018
result
2019
target
2019
result
  Success
indicator
  Short-term
target
Medium to
long-term
target
FINANCIAL                
Development surplus (R’m) – annual average over a rolling three-year period 211.0 100.0 69.7     To be approved by Remco in Nov 2019 To be approved by Remco in Nov 2019
NON-FINANCIAL                
Waterfall bulk roll out (m2) – annual average over a rolling three-year period 111 732 50 000 67 385     To be approved by Remco in Nov 2019 To be approved by Remco in Nov 2019
   
     
ENVIRONMENT, SOCIAL AND GOVERNANCE    

Resource

How we manage our natural resources influences the cost of occupancy for our tenants and our impact on the environment.

Our emphasis is on transformation and localisation as well as making corporate social investments through the Attacq Foundation.

We believe that achieving the highest standards of corporate governance is key to the sustainability of our business, attaining our vision and strategy, as well as creating and sustaining value for all stakeholders in the short, medium and long term.

We measure our commitment to transformation through our B-BBEE levels.

Strategic KPIs 2018
result
2019
target
2019
result
  Success
indicator
Short-term
target
Medium to
long-term
target
NON-FINANCIAL              
Transformation (based on adjusted property charter for REITs) Level 2
(previous
property
charter)
Level 4 Level 3   Level 3 Level 2