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SYC
SYC
SYC - Sycom - Reviewed group results and declaration of the final distribution
Sycom Property Fund
JSE share code: SYC
ISIN No: ZAE000019303
REVIEWED GROUP RESULTS AND DECLARATION OF THE FINAL DISTRIBUTION
FOR THE YEAR ENDED 31 MARCH 2007
The directors of Sycom Property Fund Managers Limited, the management company of
Sycom Property Fund (Sycom) or (the Fund), submit their report on the reviewed
results of Sycom for the year ended 31 March 2007.
CONDENSED INCOME STATEMENT
Reviewed Audited
12 months 12 months
ended ended
31 Mar 07 31 Mar 06
(R`000) (R`000)
Revenue 449 385 340 013
Rental income 392 498 310 547
Straight-line rental adjustment 46 366 23 880
Interest received 10 521 5 586
Expenditure 174 522 102 468
Administration expenses 20 125 18 490
Interest paid 47 848 7 159
Property expenses 106 549 76 819
Net income before fair value adjustments 274 863 237 545
Fair value adjustments 516 597 361 165
Realised deficit on disposal of investment - (703)
in fixed property companies
Realised surplus / (deficit) on disposal 29 253 (656)
of investment property
Unrealised surplus on revaluation of 528 946 386 404
investment property
Unrealised surplus on revaluation of 4 764 -
interest rate swap
Straight-line rental adjustment (46 366) (23 880)
Net income before taxation 791 460 598 710
Taxation 13 239 -
Earnings 778 221 598 710
Net transfer to non-distributable reserve 549 724 385 045
Distributable earnings 228 497 213 665
Number of units in issue (`000) 183 356 183 356
Earnings per unit and diluted earnings per 424.43 326.53
unit - cents
Distributable earnings per unit - cents 124.62 116.53
RECONCILIATION OF DISTRIBUTABLE EARNINGS
TO HEADLINE EARNINGS
Distributable earnings 228 497 213 665
Non distributable items
Straight-line rental adjustment 46 366 23 880
Unrealised surplus on revaluation of 4 764 -
interest rate swap
Headline earnings 279 627 237 545
Headline earnings per unit - cents 152.50 129.55
Distributions
No. 41 of 54.97 cents per unit - 100 791
No. 42 of 61.56 cents per unit - 112 874
No. 43 of 59.40 cents per unit 108 913 -
No. 44 of 65.22 cents per unit 119 584 -
228 497 213 665
CONDENSED BALANCE SHEET
Reviewed Audited
As at As at
31 Mar 07 31 Mar 06
(R`000) (R`000)
Assets
Property portfolio 3 480 037 2 982 689
Investment property 3 301 285 2 588 955
Development property - 261 348
Straight-line rental adjustment 178 752 132 386
Current assets 133 384 112 654
Rental and other receivables 20 589 28 506
Interest rate swap asset 4 764 -
Cash and cash equivalents 108 031 84 148
Total assets 3 613 421 3 095 343
Unitholders` funds and liabilities
Capital 1 281 486 1 281 486
Non distributable reserve 1 632 536 1 082 812
Interest bearing liability 529 298 541 501
Current liabilities 170 101 189 544
Total unitholders` funds and liabilities 3 613 421 3 095 343
Net asset value per unit (cents per unit) 1 589 1 289
CONDENSED STATEMENT OF
CHANGES IN CAPITAL AND
RESERVES
Non
distributable Retained
Capital reserve earnings Total
(R`000) (R`000) (R`000) (R`000)
Balance as at 1 281 486 697 767 - 1 979 253
31 March 2005
Earnings - - 598 710 598 710
Fair value - 385 045 (385 045) -
adjustment
transfer to
non
distributable
reserve
Distributions - - (213 665) (213 665)
Balance as at 1 281 486 1 082 812 - 2 364 298
31 March 2006
Earnings - - 778 221 778 221
Fair value - 549 724 (549 724) -
adjustment
transfer to
non
distributable
reserve
Distributions - - (228 497) (228 497)
Balance as at 1 281 486 1 632 536 - 2 914 022
31 March 2007
CONDENSED CASH FLOW
STATEMENT
Reviewed Audited
12 months 12 months
ended ended
31 Mar 07 31 Mar 06
(R`000) (R`000)
Cash generated from operating activities 286 150 250 728
Interest received 10 521 5 586
Interest paid (49 122) (29 247)
Distributions (221 787) (205 011)
Net cash inflow from operating activities 25 762 22 056
Proceeds on disposal of property 185 748 30 900
Additions to property (175 424) (368 800)
Net cash inflow / (outflow) from 10 324 (337 900)
investment activities
(Decrease) / increase in borrowings (12 203) 363 326
Net cash (outflow) / inflow from (12 203) 363 326
financing activities
Net increase in cash resources 23 883 47 482
Cash and cash equivalents at beginning of 84 148 36 666
the year
Cash and cash equivalents at end of the 108 031 84 148
year
NOTES
1. ACCOUNTING POLICIES
The reviewed condensed financial report has been prepared in accordance with the
requirements of International Accounting Standard 34 : Interim Reporting
("IAS34"), the JSE listing the Companies Act (Act 61 of 1973) and the Collective
Investment Schemes Control Act of 2002. The accounting policies are consistent
with those applied in the prior year. The results have been reviewed by the
auditors of the fund, Deloitte & Touche, and their unmodified review opinion is
available for inspection at the registered office.
2. PRIMARY OPERATIONAL SEGMENTS
YEAR ENDED 31 MARCH 2007
Retail Office Fund Total
(R`000) (R`000) (R`000) (R`000)
Rental income 210 693 181 805 - 392 498
Straight-line 32 515 13 851 - 46 366
rental
adjustment
Interest 768 583 9 170 10 521
received
Total revenue 243 976 196 239 9 170 449 385
Expenditure 58 340 48 209 67 973 174 522
Income before 185 636 148 030 (58 803) 274 863
fair value
adjustments
Fair value 516 597
adjustments
Taxation (13 239)
Earnings 778 221
Property 1 973 140 1 506 897 - 3 480 037
portfolio
Investment 1 892 528 1 408 757 - 3 301 285
property
Straight-line 80 612 98 140 - 178 752
rental
adjustment
Current assets 9 370 11 107 112 907 133 384
Interest bearing - - (529 298) (529 298)
liability
Current (14 746) (23 499) (131 856) (170 101)
liabilities
Net assets 1 967 764 1 494 505 (548 247) 2 914 022
YEAR ENDED 31 MARCH 2006
Rental income 140 722 169 825 - 310 547
Straight-line 9 417 14 463 - 23 880
rental
adjustment
Interest 592 534 4 460 5 586
received
Total revenue 150 731 184 822 4 460 340 013
Expenditure 37 193 40 212 25 063 102 468
Income before 113 538 144 610 (20 603) 237 545
fair value
adjustments
Fair value 361 165
adjustments
Earnings 598 710
Property 1 612 740 1 369 949 - 2 982 689
portfolio
Investment 1 332 383 1 256 572 - 2 588 955
property
Investment 232 260 29 088 - 261 348
property under
development
Straight-line 48 097 84 289 - 132 386
rental
adjustment
Current assets 2 940 20 688 89 026 112 654
Interest bearing - - (541 501) (541 501)
liability
Current (55 995) (5 440) (128 109) (189 544)
liabilities
Net assets 1 559 685 1 385 197 (580 584) 2 364 298
MANAGEMENT COMMENTARY
1. Results
Sycom`s distributable earnings for the six months ended 31 March 2007 amounted
to 65.22 cents per unit which represents growth of 5.95% over the net income of
61.56 cents per unit distribution for the same period in the previous year. The
distribution for the full year is 124.62 cents per unit which is 6.94% higher
than the previous year and is in line with expectations. The property portfolio
remains virtually fully let with a low level of renewals and the Fund
consequently did not have the benefit of achieving growth from letting vacant
space and with a significant upward reversion of rentals.
The property portfolio was independently valued at year end at R3.5bn resulting
in a revaluation surplus of R528.9m which is a 17.73% increase over book value.
The net asset value of the Fund currently stands at 1 589 cents per unit, an
increase of 23.27% over the previous year. The closing market price of 2 070
cents per unit at 31 March 2007 represents a premium of 30.27% to net asset
value. The substantial increase in the value of the Fund, even after allowing
for new developments, bears testimony to the quality of the underlying assets.
2. Operations
During the year under review, the rentable area of the Fund increased by 18
918m2, to 290 579m2, due to the completion of N1 City extention, Harrowdene
Office Park extension and the Vaal Mall development adding 34 681m2, partially
offset by disposals of 15 763m2 (refer to point 4).
Retail
The retail portfolio`s aggregated net income exceeded the budget, while
maintaining a low vacancy level of 0.86%. At present the retail portfolio
comprises 56.7% of the property asset value.
Office
The office portfolio`s aggregated net income is in line with our expectation and
increased demand for office space reduced the vacancies to 1.02% of the
portfolio. This is evident as new developments are being let prior to
commencement of construction.
3. Developments
The Fund commenced with the construction of two office buildings in the
Woodlands Office Park subsequent to year-end. The buildings measure 9 492m2 and
completion is expected in February 2008. One of the buildings measuring 6 182m2
is fully let and management is positive that the remaining building will also be
let before completion. The cost of Sycom`s 40% undivided share in the
development is R46,2m.
4. Property disposals
During the year the Fund disposed of the Hewlett Packard Building in Rivonia and
the Azisa Building in Randburg on 1 June 2006 and 4 October 2006 respectively
resulting a surplus over book value of R29,3m.
5. Funding
At 31 March 2007 the Fund`s borrowings amounted to R529,3m. Capital commitments
amount to R236,0m. Outstanding net proceeds from the sale of properties amount
to R5,3m which, together with the proceeds from the issue of new units of
R173,6m (refer point 7 below), will result in a funding requirement of R586,4m
and which is well within the Fund`s approved loan facility of R750m.
The interest rate profile of the group is shown below.
Amount Interest % of
Expiry R million rate borrowings
1 June 2011 100.0 7.97% 18.89%
1 June 2009 100.0 7.86% 18.89%
Fixed interest rates 200.0 7.90% 37.79%
Floating rates (Prime less 329.3 10.10% 62.21%
2.4%)
Gearing 529.3 9.27% 100.00%
6. Restructure
The Fund has continued in the process of restructuring by transferring the
remaining properties from the fixed property companies to the Fund itself.
Provision for an estimated capital gains tax liability of R13,2m has been made,
resulting in a reduction of the revaluation surplus.
7. Prospects
Sycom has gone through an exciting period which saw the investment in large new
developments and the sale of smaller properties resulting in a Fund of high
quality. Management is committed to extracting maximum value and income growth
and is of the view that earnings growth in the year ahead should exceed that
achieved in the current year.
Subsequent to year-end Sycom has increased its shareholding in Vaal Mall -
currently the Fund has a 51% undivided share in the consortium and has exercised
its pre-emptive right to acquire an additional 26.86% share at an agreed price
of R173,6m and which will be funded by the listing of new units of the Fund. The
issue of new units will not result in a dilution of earnings per unit. This is a
prime property and management is confident that it will show good growth in the
future.
8. Subsequent Events
No events have occurred subsequent to the year-end other than those mentioned
above.
9. Distribution Declaration
Notice is hereby given of the declaration of distribution No.44 in respect of
the six months to 31 March 2007 of 65.22 cents per unit. The last date to trade
cum distribution will be Friday, 8 June 2007 and the units will trade ex-
distribution from the commencement of business on Monday, 11 June 2007. The
record date is Friday, 15 June 2007 and payment will be made to unit holders on
Monday 18 June 2007. Unit holders may not dematerialise or rematerialise their
units between Monday, 11 June 2007 and Friday, 15 June 2007, both days
inclusive.
By order of the Board
SYCOM PROPERTY FUND MANAGERS LIMITED
(Registration number 1986/002756/06)
Directors of Sycom Property Fund Managers Limited: T E Sewell* (Chairman), N F J
Haasbroek (Chief Executive Officer), F M Berkeley*, J P D Flanagan*, C J V
Fleming*, G A Nelson*, L Norval, Ms Y Omar*, Ms S J Wentzel * Non-
executive
Registered Office:
Mertech Building
Glenfield Office Park
Cnr Genl Louis Botha and
Glenwood Road
Faerie Glen
PO Box 39068 Faerie Glen, 0043
Sponsor:
Nedbank Capital
Sponsor Unit
135 Rivonia Road
Sandton, 2196
Auditors:
Deloitte & Touche
Waterkloof House
221 Waterkloof Road
Waterkloof, 0181
Pretoria
Transfer Secretaries:
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street
Johannesburg, 2001
PO Box 61051
Marshalltown, 2107
25 May 2007
Date: 25/05/2007 07:30:01 Produced by the JSE SENS Department.
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