CFSL - Annual report 2018

BUSINESS REVIEW LAVASTONE PROPERTIES The Property cluster recorded a PAT of MUR 78.7 million (2017: MUR91.3 million). Gross operating income increased to MUR 214.6m (2017: MUR 193.5m), this includes a fair value gain of MUR 29.6m (2017: MUR 48.2m). Operationally, continued high levels of occupancy, strong lease covenants and control of operational expenses sustain the quality of the group’s cash flows. Staff costs have increased in line with increase in head count to cater for the projected growth of the group. This was partly mitigated by additional income from rental of newly acquired parking lots and rent escalation across the investment property portfolio. The restructuring of the Property cluster which started in the year under review with the regrouping of all property companies under one roof, to culminate with the listing of Lavastone Ltd (formerly Cim Property Development Ltd) on the Development and Enterprise Market effective on 28 December 2018. In this regard, and, to create a distinctive brand, the name of Cim Property Development Ltd has been changed to Lavastone Ltd and the group will trade under the Lavastone Properties brand. Once the dividend in specie of the shares of Lavastone Ltd as declared by CIM Financial Services Ltd is processed on 17 January 2019, Lavastone Ltd will operate as an entity independent from CIM Financial Services Ltd. Year under review As reported last year, Lavastone Properties was engaged in a number of projects with the aim to improve the return on its yielding and non-yielding assets. We are pleased to report that the redevelopment of the Edith Cavell site in Port Louis was started in July 2018. The project was branded “246 Edith Cavell Court” taking inspiration from the street address of the title deeds forming the property. The property is being marketed as a Grade A office building with a number of high street retail outlets and a courtyard dedicated to Food & Beverage Outlets as well as culture and entertainment. It aims to be the epitome of the ‘Work and Play’ concept and contribute to the regeneration of Port Louis. 246 Edith Cavell Court is expected to be completed by November 2019. As part of the 246 Edith Cavell Court project, the La Chausée Building was renovated and now host Galaxy since May 2018. We continue to pay close attention to the needs of our tenants and provide real estate solutions that are aligned to our tenant’s business strategies. As such, we initiated upgrading works at the St Georges and Manhattan Buildings in Port Louis in March and August 2018 respectively. The project includes an increase in leased floor area and the upgrading andmodernising of the work environment for Cim Finance employees. It also allows the integration of a corporate floor to accommodate the ‘Head Office’ of the Cim Group as from February 2019. The renovation works at St Georges were completed in July 2018 and the building is fully occupied since then. To cope with the growth in the business of Scott and Co Ltd at Riche Terre, we launched the extension of the warehouse facilities previously leased to Sebna Limited in September 2018 and completed the works in December 2018 allowing the company to generate more revenues from its activities at Riche Terre. Our projects to develop our unyielding/low yielding assets owned by our subsidiary South West Safari Group Ltd in the south west of the Island have progressed satisfactorily with a first letter of intent for a Morcellement at La Gaulette/Case Noyale. Having secured enough interest from prospective buyers, the companywill start theassociated infrastructureworks for the 11 plots found within this first Morcellement. South West Safari Group is awaiting the Environment Impact Assessment (“EIA”) permit to complete its application for two other Morcellements of 84 and 47 lots respectively. The company also sold some 125A of land in Chamarel which generated MUR 19.5 m exceptional profit for the company. Outlook With regards to the leasehold land that we hold in Belle Mare, we initiated a hospitality project on the site and have lodged an EIA application in this respect. At the same time, we have entered into a long term agreement with Attitude Hospitality Ltd for the management of the facility. Having secured good interest from prospective tenants, our mixed-use light industrial building with some 7,100 sqmof leasable space at Riche Terre is set to start in early 2019 subject to obtaining the relevant local authority permits and clearances. The project is expected to be completed in December 2019 and will benefit from the construction of a slip lane that will allow direct access from/to the M2 Motorway. 22 CIM FINANCIAL SERVICES LTD ANNUAL REPORT 2018