Dear shareholders,

As Chairman of Lavastone Ltd, it is an honour for me to present the Group’s integrated report for the third year in a row.

Lavastone, as other companies in its industry, has again faced many challenges due to the enduring Covid-19 crisis and ensuing lockdown and border closures. As a group, we saw in these difficult times the right moment to turn these challenges into opportunities, which is the theme of this year’s integrated report.

Lavastone’s long-term growth strategy is clearly defined, and we have arranged for adequate financing in the form of a secured notes programme and a Euro loan to cater for these strategic needs. Together with the Group’s strong cash flows, these funds are earmarked for development projects and/or acquisitive opportunities, which are regularly reviewed by management and the Board, to ensure they produce the expected returns within acceptable risks.

Another part of our growth strategy means we may delay a project to reposition it and/or simply wait until we reach the required pre-let levels with strong covenants. An example of this is maintaining our decision to put on hold the construction of the retail warehouse in Riche Terre, due to the continuing effects of the Covid-19 pandemic on the local economy as well as soaring construction prices.

“This year again, our initiatives were rewarded with the perpetuation of our Grade A credit rating from Care Ratings Africa, allowing us to continue benefiting from attractive interest rates.”

Despite the challenges pought about by a second lockdown, the Group benefits from a strong balance sheet. We have produced a positive cash flow for the financial year 2021, with a healthy loan to value ratio of 19%, a Net Operating Income (NOI) of Rs 172M (Rs 151M in FY 2020), a Profit Before Tax (PBT) before revaluation of Rs 73.8M and a Net Asset Value (NAV) of Rs 2.877M. In light of this, we declared an interim dividend of 2 cents per share in May 2021 and a final dividend of 2 cents per shares in December 2021.

We are in the process of welcoming a group of prominent Notaries at 246 Edith Cavell Court. This will substantially reduce our available vacant office space, and is testament to the enduring demand for well-connected world-class facilities in a vipant and attractive location.

On another note, I am pleased to announce that management has concluded the negotiations to acquire the 7th floor of Les Cascades building, following the departure of the British High Commission to their new offices at Westminster House in Flor al. The transfer of property is expected to occur during the first quarter of 2022.

As a continuation of the renovation programme started in 2021, we will be assisting our tenant, IQ-EQ, with the refurbishment of three more floors at Les Cascades building, allowing them to welcome a growing team of talented individuals by the end of the third quarter of 2022.

Moreover, despite suffering the delays pought about by the two lockdowns, we noted good progress on the soon to open Victoria Urban Terminal, which will make a positive contribution towards the lives of daily commuters to and from Port Louis, and add impetus to the regeneration of our capital city. Our subsidiary, Lochiel Property Services Limited (Lochiel), was awarded the contract for property and facilities management services. I commend the team at Lochiel on taking up this challenge and wish them success on this new and important venture.

As explained last year, we agreed with our partner, Attitude Hotels, to delay the opening of the Sunrise Attitude till October 2021. I am pleased to say the hotel opened on time and was inaugurated by the Prime Minister and Deputy Prime Minister on 15 October 2021. This project is a live example of partnering with our stakeholders to deliver superior value in design, quality, sustainability and services, and live up to our vision of providing real estate solutions while delivering optimum returns to shareholders. As the sun rises on the economic landscape of the tourism industry, we expect B59 Ltd to start contributing to the group profits during the financial year 2022.

In Rodrigues, the redevelopment and extension of Play Mourouk Hotel has been delayed, as flights to Rodrigues have not yet restarted. Combined with the complexities of construction and the restrictions imposed by the authorities, the opening of the Play Mourouk Hotel is now planned for late 2022.

Risk management

During the 2021 financial year, we reviewed our operational procedures and implemented several risk management initiatives, including Business Continuity Management in line with ISO 22301. We also established the Group’s Risk Appetite in line with ISO 31000, reinforced our compliance with the Data Protection Act and implemented our Anti-Money Laundering Policy. You can read more about risk governance and management at Lavastone in our Risk Management Report, available on pages 30 to 45.

Corporate governance

Doreen Lam resigned from her positions as CFO of Lavastone and Director on the Board, in August 2021. Lavastone’s Board of Directors joins me in thanking her for her valuable contribution to Lavastone and wishing her the best in her future endeavours. This, along with onboarding new talents to help us turn challenges into opportunities, have slightly impacted our women to men ratio, which decreased to 38% (39% in 2020) women for 62% (61% in 2020) men. Though the gap is more significant than last year, the ratio remains fair and we are still compliant with the Code in terms of diversity. You can read more about corporate governance at Lavastone in our Corporate Governance Report, available on pages 46 to 62.

Sustainability

At Lavastone, we recognise the real estate industry is one of the main users of energy and cause of carbon emission, which is why we have engaged Dynamia Ltd to review and accurately establish our carbon footprint across the Group, as well as to assist us in mapping out a realistic yet ambitious strategy to reduce our carbon footprint.

In this vein, we have installed our first set of Molok bins in Riche Terre and are, at the time of writing, implementing another set at our Orchids car park, to encourage our tenants and their teams at Les Cascades and Manhattan buildings, as well as all our parking users, to recycle their waste and reduce carbon emissions associated with the collection process.

In addition, we have - in collaboration with the CIM CSR Foundation - provided land to iMOVE/UDDESHY, a non-profit organisation established to empower women in the field of Agriculture. They will use recycled coffee waste from our tenant, Scott & Co Ltd, to set up a composting unit, using the resulting product as an organic fertiliser to grow vegetables.

The redevelopment of the Play Mourouk Hotel in Rodrigues is being undertaken in accordance with the LEED principles. This property will be the second project to be developed as such, 246 Edith Cavell Court is in the process of receiving its LEED accreditation.

Acknowledgement

My heartfelt thanks go to Nicolas Vaudin, our Managing Director, and his management team, for helping Lavastone overcome yet another challenging financial year.

I am also grateful for the support provided by my colleagues on the Board of Directors, as well as that of our shareholders throughout this watershed year. Without your trust and loyalty, Lavastone would certainly not be where it is today!