Vukile lifts FY26 guidance as SA and Iberian retail outperform

Key topics:Retail outperformance: SA NOI up 10%; Iberia GRI up 8.2%; vacancies extremely low at 1.8% and 1.3%.Balance-sheet strength: R2.65bn equity raise; R4.7bn liquidity; credit ratings upgraded.Cost pressures: Admin costs up 24% in SA, 39% in Iberia; office vacancies rising in SA.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here..BizNews Reporter.Vukile Property Fund has delivered a strong set of interim results for the six months to September 2025, supported by resilient retail portfolios in South Africa and Iberia, continued outperformance in Castellana, and an improved capital structure following an oversubscribed equity raise. The group’s consumer-led strategy, focus on operational efficiencies, and proactive asset management contributed to the board upgrading full-year FY26 guidance to at least 9% growth in both FFO per share and the dividend.Management highlighted that the group is benefiting from robust tenant demand, high-quality assets, strong sales performance in its malls, and tight cost control—particularly in South Africa where solar PV and other efficiencies continue to reduce operating expenses.Strong operational gains across SA and IberiaVukile reported excellent like-for-like growth across its two core geographies.South Africa generated strong top-line momentum, with retail Net Operating Income (NOI) up 10% driven by sales growth, improved rental reversions and cost efficiencies. Retail vacancies remained exceptionally low at 1.8%, while rental reversions improved to +2.5%.Operational performance was bolstered by a sharp reduction in the cost-to-income ratio from 15.3% to 12.5%, attributed to solar PV rollout and more efficient facilities management. Like-for-like property valuations increased 5.9%.Collections remained exceptionally strong at 102%, underscoring the resilience of Vukile’s retail tenant base.Iberia (via Castellana) continued to outperform the broader Spanish and Portuguese retail markets. The portfolio delivered 8.2% GRI growth and 8.7% normalized NOI growth on a like-for-like basis. Rental reversions were a standout at 7.5%, and vacancies were extremely low at 1.3%.Footfall rose 3.5% and tenant sales increased 4.2%, supported by strong trading at Castellana’s dominant Spanish and Portuguese retail centres. The Iberian portfolio achieved a robust WALE of 8.9 years, reflecting long-term tenant commitment.Strengthened liquidity and credit rating upgradesVukile significantly bolstered its financial position through enhanced liquidity, improved credit ratings and an equity raise.At period end, the group held R2.3 billion in cash and R2.4 billion in undrawn facilities. In October 2025, Vukile completed an oversubscribed R2.65 billion equity issuance, further strengthening its balance sheet and providing capacity for future acquisitions in South Africa, Spain and Portugal.The group also benefited from upgrades to its credit ratings:GCR upgraded Vukile to AA+(ZA), citing strong access to debt markets and consistent operational delivery.Fitch upgraded Castellana to BBB, reflecting improved business quality following recent acquisitions.The hedge ratio increased to 91%, ensuring protection against interest rate volatility. The interim dividend was lifted 9% to 60.2 cents per share, with cash cover of nearly 2×.Costs Rise as Iberian expansion acceleratesDespite strong operational performance, group-level expenditure increased materially. Corporate administration costs rose 24.2% to R278 million, driven largely by higher performance-related pay in South Africa.In Iberia, corporate costs increased 39.4%, partly due to a larger Castellana team following expansion into Portugal and increased spending to integrate newly acquired assets. Excluding FX impacts, costs rose 32.4%.Group interest cover dipped slightly to 2.7× (from 2.9×), though management expects improvement in the second half following the equity raise and delivery of further acquisitions.Portfolio risks and market considerationsWhile retail performance remains exceptional, some structural risks persist. Office space within retail environments in South Africa remains under pressure, with office vacancies rising to 4.9%, prompting exploration of alternative uses for properties in Mbombela and Randburg.In Iberia, Portugal’s collection rate of 95.3% lags Spain’s 99.2%, though Vukile expects continued improvement as its tenant management systems bed down.Management remains cautiously optimistic on South Africa’s macroeconomic recovery but warns that structural issues—ranging from unemployment to infrastructure decay—continue to pose risk in the run-up to national elections.OutlookVukile enters the second half of FY26 with strong cash resources, upgraded ratings, and high-performing retail assets across two continents. With growth in NOI and trading densities firmly established, the group is positioned to deploy capital into further value-accretive acquisitions. Full-year guidance has been upgraded to at least 173.1 cents FFO per share and 143.6 cents dividend per share—underscoring confidence in sustained growth..Read the results in full by downloading the PDF below

Vukile lifts FY26 guidance as SA and Iberian retail outperform

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