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SYC
SYC
SYC - Sycom Property Fund - Unaudited group results and declaration of the
interim distribution for the six months ended 30 September 2007
Sycom Property Fund
JSE SHARE CODE: SYC
ISIN NO: ZAE000019303
A Collective Investment Scheme in property registered in terms of the
Collective Investment Schemes Control Act, No. 45 of 2002 and managed by
Sycom Property Fund Managers Limited (Registration number 1986/002756/06)
UNAUDITED GROUP RESULTS AND DECLARATION OF THE INTERIM DISTRIBUTION FOR THE
SIX MONTHS ENDED 30 SEPTEMBER 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
unaudited results of Sycom for the six months ended 30 September 2007
CONDENSED INCOME STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
30 Sep 07 30 Sep 06 31 Mar 07
(R`000) (R`000) (R`000)
Restated
Revenue 213,823 196,630 438,864
Rental income 209,965 186,951 392,498
Straight-line rental
income accrual 3,858 9,679 46,366
Expenditure 66,902 62,843 126,674
Administrative expenditure 763 555 823
Auditors` remuneration 167 221 870
Property management fees 6,313 3,681 10,048
Property expenses 49,295 49,105 95,921
Service charge 10,364 9,281 19,012
Operating income 146,921 133,787 312,190
Net finance cost 20,824 15,195 37,327
Net income before fair
value adjustments 126,097 118,592 274,863
Realised surplus on disposal
of investment property 23,162 3,727 29,253
Unrealised surplus on
revaluation of interest
rate swap 4,016 5,915 4,764
Straight-line rental
income accrual (3,858) (9,679) (46,366)
Unrealised surplus on
revaluation of investment
property - 10,457 509,760
Net income before taxation 149,417 129,012 772,274
Taxation - 10,457 13,239
Earnings 149,417 118,555 759,035
Number of units in issue (`000) 205,107 183,356 183,356
Number of weighted
average units in issue (`000) 188,298 183,356 183,356
Earnings per unit and
diluted earnings per
unit - cents 72.85 64.66 413.97
Weighted average earnings
per unit - cents 79,35 64.66 413.97
RECONCILIATION OF EARNINGS, HEADLINE EARNINGS
AND DISTRIBUTABLE EARNINGS
Earnings 149,417 118,555 759,035
Realised surplus on
disposal of investment
property (23,162) (3,727) (29,253)
Headline earnings 126,255 114,828 729,782
Unrealised surplus on
revaluation of investment
property - - (496,521)
Unrealised surplus on
revaluation of interest
rate swap (4,016) (5,915) (4,764)
Distribution clawback 9,333 - -
Distributable earnings 131,572 108,913 228,497
Headline earnings per
unit - cents 61.56 62.63 398.01
Weighted average headline
earnings per unit - cents 67.05 62.63 398.01
Distribution per unit - cents 64.15 59.40 124.62
Distributions per unit
No. 43 of 59.40 cents per unit - 108,913 108,913
No. 44 of 65.22 cents per unit - - 119,584
No. 45 of 64.15 cents per unit 131,572 - -
131,572 108,913 228,497
CONDENSED BALANCE SHEET Unaudited Unaudited Audited
30 Sep 07 30 Sep 06 31 Mar 07
(R`000) (R`000) (R`000)
Restated
ASSETS
Non-current assets
Investment property 3,579,765 2,987,864 3,480,037
Investment property under
development 36,440 - -
Investment in securities 257,588 - -
Total non-current assets 3,873,793 2,987,864 3,480,037
Current assets
Rental and other receivables 35,994 40,441 20,589
Other financial assets 8,780 5,915 4,764
Cash and cash equivalents 105,926 75,601 108,031
Total current assets 150,700 121,957 133,384
Total assets 4,024,493 3,109,821 3,613,421
UNITHOLDERS` FUNDS AND LIABILITIES
Unitholders` funds
Unitholders` capital 1,661,962 1,281,486 1,281,486
Non-distributable reserves 1,659,714 1,111,641 1,632,536
Total capital and reserves 3,321,676 2,393,127 2,914,022
Non-current liabilities
Unsecured borrowings 525,125 526,539 529,298
Total non-current liabilities 525,125 526,539 529,298
Current liabilities
Trade and other payables 32,881 70,786 37,278
Taxation payable 13,239 10,457 13,239
Unitholders for distribution 131,572 108,913 119,584
Total current liabilities 177,692 190,156 170,101
Total liabilities 702,817 716,694 699,399
Total unitholders` funds
and liabilities 4,024,493 3,109,821 3,613,421
Net asset value per unit - cents 1,619 1,305 1,589
Weighted average net asset
value per unit - cents 1,764 1,305 1,589
CONDENSED STATEMENT OF CHANGES IN CAPITAL AND RESERVES
Non Retained
Distributable income
Capital reserve Total
(R`000) (R`000) (R`000) (R`000)
Balance at
31 March 2006
(Restated) 1,281,486 1,101,998 - 2,383,484
Earnings - - 118,555 118,555
Transfer to
non-
distributable
reserve - 9,642 (9,642) -
Unitholders`
distribution - - (108,913) (108,913)
Balance at
30 September 06 1,281,486 1,111,640 - 2,393,126
Earnings - - 640,479 640,480
Transfer to
non-
distributable
reserve - 520,896 (520,896) -
Unitholders`
distribution - - (119,584) (119,584)
Balance at
31 March 07 1,281,486 1,632,536 - 2,914,022
Issue of
5,063,109
units on
7 June 07 97,718 - - 97,718
Issue of
16,688,123
units on
10 Sept 07 284,366 - - 284,366
Expenses
recognised
directly in
equity (1,608) - - (1,608)
Distribution
Clawback - - 9,333 9,333
Earnings - - 149,417 149,417
Transfer to
non-
distributable
reserve - 27,178 (27,178) -
Unitholders`
distribution - - (131,572) (131,572)
Balance at
30 September 07 1,661,962 1,659,714 - 3,321,676
CONDENSED CASH FLOW STATEMENT
Unaudited Unaudited Audited
at at at
30 Sep 07 30 Sep 06 31 Mar 07
(R`000) (R`000) (R`000)
Cash generated from
operating activities
Cash generated from
operating activities 134,277 118,196 286,149
Interest received 10,952 5,108 10,521
Interest paid (31,776) (20,303) (47,848)
Distribution paid (119,585) (112,874) (221,786)
Net cash (outflow)/inflow
from operating activities (6,132) (9,873) 27,036
Cash flows from investing
activities
Additions to investment and
development property (213,345) (42,830) (176,698)
Additions to investment in
Securities (257,588) - -
Proceeds on disposal of
investment property 98,657 59,118 185,748
Net cash (outflow)/inflow
from investing activities (372,276) 16,288 9,050
Cash flows from financing
activities
Increase in issued capital 380,476 - -
DecreASE in borrowings (4,173) (14,962) (12,203)
Net cash inflow/(outflow) from
financing activities 376,303 (14,962) (12,203)
Net (decrease)/increase in cash
and cash equivalents (2,105) (8,547) 23,883
Cash and cash equivalents at
the beginning of the period 108,031 84,148 84,148
Cash and cash equivalents at the
end of the period 105,926 75,601 108,031
NOTES
1. ACCOUNTING POLICIES
The unaudited financial report has been prepared in accordance with the
requirements of International Financial Reporting Standards ("IFRS");
International Accounting Standards 34: Interim Reporting ("IAS 34"), the JSE
listings, 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, but now include the recognition of dividend
income and recognition of revaluation profit and loss of offshore securities.
2. PRIMARY OPERATIONAL SEGMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007
Retail Office Fund Total
(R`000) (R`000) (R`000) (R`000)
Rental income 117,410 92,555 - 209,965
Straight-line rental
income accrual 8,634 (4,776) - 3,858
Total revenue 126,044 87,779 - 213,823
Expenditure 31,428 24,180 11,294 66,902
Net finance cost (329) (1,565) 22,718 20,824
Net operating income 94,945 65,164 (34,012) 126,097
Fair value adjustments 23,320
Earnings 149,417
Non-current asset 2,409,348 1,464,445 - 3,873,793
Current assets 16,484 33,038 101,178 150,700
Total Assets 2,425,832 1,497,483 101,178 4,024,493
Unsecured borrowings - - 525,125 525,125
Current liabilities 14,388 27,498 4,234 46,120
Unitholders`
distribution - - 131,572 131,572
Total liabilities 14,388 27,498 660,931 702,817
Total capital and
reserves 2,411,444 1,469,985 (559,753) 3,321,676
3. PRIMARY OPERATIONAL SEGMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006
(Restated)
Retail Office Fund Total
(R`000) (R`000) (R`000) (R`000)
Rental income 99,323 87,628 - 186,951
Straight-line rental
income accrual 5,012 4,667 - 9,679
Total revenue 104,335 92,295 - 196,630
Expenditure 28,343 24,443 10,057 62,843
Net finance cost (436) (311) 15,942 15,195
Net operating income 76,428 68,163 (25,999) 118,592
Fair value adjustments 10,420
Taxation (10,457)
Earnings 118,555
Non-current asset 1,621,991 1,365,873 - 2,987,864
Current assets 15,860 21,713 84,384 121,957
Total assets 1,637,851 1,387,586 84,384 3,109,821
Unsecured borrowings - - 526,539 526,539
Current liabilities 43,273 28,177 9,792 81,242
Unitholders`
distribution - - 108,913 108,913
Total liabilities 43,273 28,177 645,244 716,694
Total capital and
reserves 1,594,578 1,359,409 (560,860) 2,393,127
4. MAJOR PROFIT GENERATING PROPERTIES*
(* Properties contributing more than 10% to net income)
Rental Income Net Income
(R`000) % (R`000) %
Somerset Mall
(50% undivided share) 30,520 14.5% 22,104 14.3%
Harrowdene Office Park 24,328 11.6% 17,682 11.5%
Vaal Mall
(77.9% undivided share) 22,698 10.8% 17,195 11.1%
The Woodlands Office Park
(40% undivided share) 20,123 9.6% 16,611 10.8%
Sold properties 4,428 2.1% 3,090 2.0%
Other properties 107,868 51.4% 77,675 50.3%
Total 209,965 100.0% 154,357 100.0%
MANAGEMENT COMMENTARY
1. Results
The distributable earnings for the six months ended 30 September 2007
amounted to 64.15 cents per unit which represent growth of 8% over the 59.40
cents per unit distribution for the same period in the prior year. The income
from Stenham European Shopping Centre Fund IC (SESCF) will be recognised in
the next six months when Sycom is entitled to the dividend (as set out in
Note 3).
The retail assets comprise 62% of the asset value and 60% of total revenue
without revaluing the property at half year.
2. Operations
The property portfolio has experienced good net income growth of 15%. The
portfolio remained almost fully let with an office vacancy of 1.1% and retail
of 0.9%. In the six months ended 30 September 2007, new leases and lease
renewals of 30 779m2 were signed at an average escalation of 8.3%. Strict
cost control and the implementation of national service contracts reduced the
cost to income ratio (after amortisation of Tenant Installation and Lease
Commission) to 31.9% compared to 33.6% for the same period in the prior year.
The proportionate investment in Vaal Mall was increased at an initial yield
of 8% from 51% to 78% and was funded with the issue of Sycom units.
Management is pleased with the performance of the mall with a year on year
increase in trading density in excess of 30%.
3. Stenham European Shopping Centre Fund IC (SESCF)
On 18 July 2007 Sycom acquired 22.5% in SESCF for the sum of R257,6m using
the Collective Investment Scheme`s foreign investment allowance. The capital
was funded with the subsequent issue of Sycom units. The total sum of R257,6m
included a R39m capital prepayment and a rental guarantee of R0,594m. The
capital loan bearing interest at 4.85% was reduced by the prepayment. SESCF
acquired the 96 000m2 regional shopping centre, Nova Eventis, in Leipzig,
Germany. The shopping centre has 215 stores with 58% of the tenants fashion
oriented and well known European brands.
4. Developments
Construction of the R115,5m, 9 492m2 first phase in The Woodlands Office Park
extension is on track and due for completion in February 2008. The
development of the R290,3m, 20 585m2 final phase in The Woodlands Office
Park, has commenced, of which Deloitte & Touche will be occupying 11 918m2.
This development is due for completion in December 2008. The cost of Sycom`s
undivided share (40%) in both developments amounts to R162,3m.
5. Property disposal
The disposal of the Arivia.kom building in Sunninghill generated a surplus on
valuation of R23,2m at the selling price of R98,7m. The proceeds were used to
reduce unsecured borrowings.
6. Funding
At 30 September 2007 the Fund`s capital borrowings amounted to R525,1m.
Outstanding short term development commitments and sundry capital expenditure
amount to R64,9m. This is well within the Fund`s permissible borrowing
capacity of R1,16bn. The Fund`s debt to asset ratio is 14% compared to 18%
for the same period in the prior year.
The interest rate expiry profile of the Fund is shown below:
At 30 September 2007 At 30 September 2006
Amount Interest Amount Interest
rate rate
(Rmillion) (%) (Rmillion) (%)
Expiry
1 June 2009 100.0 7.86 100.0 7.86
1 June 2010 100.0 7.97 100.0 7.97
Fixed interest
Rates 200.0 7.92 200.0 7.92
Floating interest
Rate 325.1 11.50 326.5 9.40
2007:Prime less 2.5%
2006:Prime less 2.1%
Total 525.1 10.14 526.5 8.84
7. Prospects
Management is focusing on maximising value generated from the high quality
property portfolio, identifying asset expansion and redevelopment potential
and increasing offshore exposure. The outlook for the second half ending
March 2008 will be impacted by higher interest rates and a timing difference
in the dividend from SESCF.
8. Subsequent events
Unitholders are referred to the Cautionary Announcement released on 1
November 2007. Sycom has entered into negotiations which, if successfully
concluded, may have a material effect on the price of the Fund`s units.
9. Distribution declaration
Notice is hereby given of the declaration of distribution No.45 in respect of
the six months to 30 September 2007 of 64.15 cents per unit. The last day to
trade cum distribution will be Friday, 23 November 2007 and the units will
trade ex-distribution from the commencement of business on Monday, 26
November 2007. The record date is Friday, 30 November 2007 and payment will
be made to unitholders on Monday, 3 December 2007. Unitholders may not
dematerialise their units between Monday, 26 November 2007 and Friday, 30
November 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*, 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
8 November 2007
Date: 08/11/2007 17:15:01 Produced by the JSE SENS Department.
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