SETTING THE BOARD
STRATEGIC REPORT
Developing strategic skills
with a chess master’s drills
OUR
STAKEHOLDERS
Their importance for us
Key matters and expectations
Value created
Shareholders
Their importance for us
As providers of capital, our shareholders provide the financial resources to fund our growth and expansion plans.
Key matters and expectations
• Solid financial controls
• A clearly-articulated long-term strategy
• Sustained and consistent returns
• High standards of business conduct
• Transparent communication on the
Group’s performance
Value created
• Prudent financial controls
• A clear diversification strategy for long-term growth
• A portfolio of yielding properties in key locations around the island
• Ethical leadership and business practices
• Periodic communication on financial results
• Quality tenants with strong lease covenants
Employees
Their importance for us
Their individual and collective skills
and capabilities underpin our success.
They embody our values, deliver
high-quality services to our customers
and drive our growth plans.
Key matters and expectations
• A caring employer
• A positive work environment where they can thrive
• Opportunities for mentorship, career growth and
personal development
• Reward and recognition
Value created
• Clear performance metrics
• One-on-one feedback sessions
• Team-building activities and town hall meetings to foster a strong team spirit and ensure all have a clear
understanding of the Group’s objectives
• Training and development
Customers
Their importance for us
As direct users of our products and
services, our customers inform the
relevance of our offerings and brand reputation.
Key matters and expectations
• A good understanding of their changing
needs
• Quality infrastructure, facilities and services that enhance their wellbeing
Value created
• Activities and events that spark life into our buildings and city centres, and bring people together
• The creation of enriching spaces that attract shoppers and keep up with consumer trends
Tenants
Their importance for us
They are the occupiers of our spaces and provide the cash flow needed to operate our properties.
Key matters and expectations
• A good understanding of their business objectives
• Safe, cost-efficient and sustainable properties that enhance their working and leisure experiences
• A responsible landlord, providing quality amenities and services
• Competitive and market-aligned rentals
• Prompt resolution of issues
Value created
• Participation in the fit-out of buildings to make the spaces suitable for tenants
• Renovations, maintenance and repairs to ensure our properties are of high standing and enable our tenants to
attract and retain their talents
• Proactive communication plan and feedback mechanisms
• Engagement in ambitious environmental goals
Partners
Their importance for us
Our partners and suppliers provide us with the inputs and raw materials that are critical to our ability to develop
and maintain high-quality properties.
Key matters and expectations
• Fair tender processes and Service Level
Agreements (SLAs)
• Fair procurement practices
• Timely settlement of accounts
Value created
• Transparent tender processes
• Clear terms of contracts in SLAs
• Timely payments through well-controlled processes
• Opportunities for local suppliers
Communities
Their importance for us
Our partners are critical to our ability to develop and maintain high-quality properties.
Key matters and expectations
• Harmonious relationships with communities
• Contribution to the vilitatity of the areas where we operate
• Participation in socioeconomic development
• Job opportunities
• Sustainable use of resources
Value created
• CSR interventions through the Taylor Smith Foundation
• Transformation of heritage buildings and urban centres into enriching spaces
• Adherence to LEED principles to enhance the resilience of buildings and reduce the carbon footprint of our activities
OUR
BUSINESS MODEL
Our capitals and inputs
Financial
The debt instruments, equity and funds we use to finance our development projects, future acquisitions and growth ambitions.
Manufactured
Investments in the upgrade and maintenance of equipment, infrastructure and processes to maximise the yielding potential and longevity of our portfolio of properties.
Intellectual
The intangible assets that lend us our competitive advantage: our values, reputation, brands, performance-driven culture, and expertise in the development and management of complex projects.
Natural
The responsible use of natural resources in the development and management of our properties, in pursuit of our vision to become carbon neutral.
Social
Continuous and meaningful engagement with our stakeholders to foster and maintain relationships built on shared values, goodwill and trust.
Human
Our people and their individual and collective skills, talent and experience gained through training and collaboration, enabling us to serve our customers and deliver on our strategy.
Our activities
Investment and development
The debt instruments, equity and funds we use to finance our development projects, future acquisitions and growth ambitions.
Property management
Investments in the upgrade and maintenance of equipment, infrastructure and processes to maximise the yielding potential and longevity of our portfolio of properties.
Portfolio management
The intangible assets that lend us our competitive advantage: our values, reputation, brands, performance-driven culture, and expertise in the development and management of complex projects.
Strategic objectives
Operational excellence
1, 2
Customer service and retention
1, 2, 3
Sustainability
2,3,4
Maximise shareholder value
1, 3, 4
Employee engagement
3, 4
- 1 Explore new investment opportunities
- 2 Implement development projects
- 3 Adopt ‘Green by Design’ principles across all projects
- 4 Maintain at least 95% occupancy across the portfolio
Strategic intent & vision
To be the preferred partner for commercial real estate solutions,while delivering optimum returns to our shareholders.
Always guided by our values
Agility, Humility, Care, Passion
Outputs and value created
Financial
Good market capitalisation, steady growth and sustainable returns delivered to our shareholders.
Manufactured
Well-maintained assets attracting a mix of quality tenants, resulting in high occupancy rates and increasing footfall.
Intellectual
Leaner and increasingly digitised processes, boosting innovation, operational efficiency, productivity and customer engagement.
Natural
The transformation of land and properties into enriched and energy-efficient places, all working to obtain the LEED certification and contributing to environmental
Social
Mutually beneficial and long-term relationships with our stakeholders, including our people, suppliers, service providers, customers and communities, underpinning our success.
Human
A dynamic and inclusive work environment offering opportunities for career advancement, personal development and mobility, and empowering our people to reach their full potential.
CHAIRMAN’S
MESSAGE
Performance in context
Dear Stakeholders,
As anticipated, FY 2023 was characterised by rising inflation and subsequent interest rate hikes, impacting our business through higher finance costs. Despite the difficult global macroeconomic environment, Lavastone Properties delivered a respectable performance: Net Operating Income (excluding profit on sale of land) grew by 7.1% over the previous year, driven mainly by additional rental income derived from new tenants at Absa House and EDITH, and higher occupancy rates across all properties.
We made strides in rebalancing our investment portfolio, bringing us closer to our set risk appetite, and implemented effective measures to control our operating costs. Following the sale of our industrial land in Riche Terre last year, and having drawn down the remaining Rs 550m from our MCB bond facility, we have the necessary funding in place to pursue our ongoing development projects and finalise earmarked acquisitive opportunities. All of the above resulted in a sustained improvement in the Profit Before Tax, which stood at Rs 247m for the year, including revaluation adjustments.
I credit this performance to several factors: Lavastone Properties’ conservative approach to managing our balance sheet; our ability to make the right investments at the right time; and the quality of our tenants, as well as the strength of our relationship with them, enabling us to generate a dependable flow of rental income and to comfortably service our debt obligations. Our gearing level stood at 33% as at September 2023, indicating that Lavastone Properties is in good financial health, and making it possible for us to maintain our A Grade CARE rating. In light of these financial results for the year ended 30 September 2023, the Board declared and paid an interim dividend of Rs 0.025 per share, and approved a final dividend of Rs 0.045 per share.
Strategic and operational highlights
As previously stated, we delivered on one of our key strategic objectives to rebalance our portfolio in view of our increased exposure to the office segment at the end of 2022. Several acquisitions have been earmarked in the industrial asset class and are expected to materialise in early 2024, further optimising our portfolio.
Our focus during the year was squarely on preparing for the opening of the Mourouk hotel in November 2023, and in enhancing the yielding potential of our existing properties. All building upgrades and renovations we undertake are tailored to the occupier’s individual needs and aim at enhancing the appeal of the property both for tenants, and for the markets they serve.
Victoria Urban Terminal has no doubt transformed the landscape of Port Louis and played an important role in easing the flow of people in and out of the capital city. In pursuit of our mission to rejuvenate Port Louis, we are undertaking a concerted drive with other stakeholders to reposition the capital as a focal point for recreational gatherings and experiences that enhance the lives of residents, businesses, visitors and the surrounding community alike.
Additionally, we completed the transfer of title deeds in the Morcellement at Case Noyale to their individual owners, with 91% of plots transferred, and the remaining scheduled for completion by the end of December 2023.
Progress in our Environmental, Social and Governance (ESG) journey
ESG remains a cornerstone of Lavastone Properties’ strategy, reflecting our commitment to create lasting value for all our stakeholders.
Lavastone Properties’ governance and risk practices are reviewed regularly not only to ensure that we comply with regulatory standards, but also that we uphold high standards of transparency and accountability. A diverse Board contributes to enhanced decisionmaking as it encourages a wide range of perspectives and approaches to problem-solving, strengthening our capacity to address complex issues more effectively.
Members of the Risk and Management Committee (RMAC), a sub-committee of the Board, meet on a quarterly basis to provide insights into our governance, risk and internal control measures. This past year, they reassessed the risk landscape to cater for changes in the operating environment, and reviewed the Top 10 risks in our Business Risk Register ( Risk Management Report ) As a result of this exercise, the Management team made it its priority to seek out investment opportunities to rebalance its portfolio in the industrial building segment.
Our environmental ambitions gathered momentum during the year. Recognising that real estate assets are big consumers of energy, Lavastone Properties is engaging closely with WillChange to delve deeper into our carbon footprint performance, including our Scope 3 emissions, and design a tangible action plan that aligns with the Group strategy.
EDITH’s LEED Gold certification stands as a testament of the power of sustainable design, operations and maintenance practices. This achievement provided us with the impetus to start the process towards a green building certification for CIM House, Les Cascades Building and Absa House. We are now working closely with our tenants in those properties to gather sufficient data and demonstrate a continued or improved performance over a 12-month period, which is a prerequisite for a LEED certification. Ultimately, this is expected to yield benefits on many fronts, from enhancing the energy efficiency of these buildings and improving human health, to driving down the operating costs for our tenants.
Our social endeavours address the needs of our internal stakeholders, our employees, as well as those of our external stakeholders, including communities and society at large. We continued to invest in our people, whom we consider our most important assets. Our efforts were directed towards cultivating a sense of belonging and strengthening team cohesion through quarterly town hall meetings and team-building activities. We also advocate for the continuous development and upskilling of employees, offering training sessions and sponsorships to those who express a willingness to enhance their knowledge.
During the year, we made contributions to the Taylor Smith Foundation in support of its actions in education & youth development, the empowerment of women and families, sports, and the protection of the environment. In addition, we recycled 174 kgs of paper into pencils that have been partly shared among our employees and customers, and partly distributed to schools in the community, underscoring our commitment to Education and literacy as catalysts for social progress.
Outlook for the future
While there is a valid concern about the inflationary and high-interest-rate environment, it is heartening to see dynamic activity in the real estate sector. Given our prudent approach, we have a reasonably optimistic outlook on the prospects for FY 2024, with the highly anticipated opening of the Mourouk Hotel and the booming tourism industry in Mauritius and Rodrigues. We aim to finalise our acquisitive opportunities in early FY 2024, which will be financed by the cash drawdown from the MCB Bond Programme and further boost the profitability of the Group in the coming years. Lastly, the Management team is actively seeking out acquisitive opportunities, both locally and overseas, to further diversify Lavastone Properties investment portfolio.
Appreciation and acknowledgments
First and foremost, my sincere gratitude goes out to our Management team, guided by our Managing Director Nicolas Vaudin, for once again steering Lavastone Properties through a challenging period with conviction and purpose. I would also like to take this opportunity to thank François Audibert for his invaluable contributions and positive energy he brought to his role as Operations Manager. We wish him all the very best as he embarks on a new chapter in his professional journey.
All our achievements, big or small, are the outcome of the combined dedication of Lavastone Properties’ 50 team members. I am thankful for your individual contributions and collaborative spirit that have shaped a positive and high-performing work culture.
To my fellow members on the Board of Directors, thank you for your constant guidance and counsel. In particular, I would like to thank Ruby Saha and Shyam Mohadeb, the Chairs of the Corporate Governance Committee and Audit Committee respectively, for elevating the governance standards at Lavastone Properties.
With deep appreciation, I thank our shareholders for their continued loyalty and trust in us, which will assuredly pave the way for the promising future that lies ahead.
Chairman
