| Thu 22 May 2008, 17:05 | | SYC - Sycom Property Fund - Audited group results |
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SYC
SYC
SYC - Sycom Property Fund - Audited group results and declaration of the final
distribution for the year ended 31 March 2008
SYCOM PROPERTY FUND
ISIN NO: ZAE 000019303
JSE SHARE CODE: SYC
AUDITED GROUP RESULTS AND DECLARATION OF THE FINAL DISTRIBUTION FOR THE YEAR
ENDED 31 MARCH 2008
The directors of Sycom Property Fund Managers Limited, the management company of
Sycom Property Fund (Sycom or the Fund), submit their report on the audited
results of Sycom for the year ended 31 March 2008
CONDENSED INCOME STATEMENT Audited Restated
12 months 12 months
ended ended
31 Mar 08 31 Mar 07
(R`000) (R`000)
Revenue 390 087 400 294
Rental income 389 823 353 928
Straight-line rental income accrual (6 252) 46 366
Dividend income 6 516 -
Expenditure 88 705 88 104
Administrative expenditure 1 161 823
Auditors` remuneration 935 870
Property expenses 65 519 67 399
Property management fees 13 002 10 048
Property operating costs (Note 1) 52 517 57 351
Service charge 21 090 19 012
Operating income 301 382 312 190
Net finance cost 40 231 37 327
Net income before fair value adjustments 261 151 274 863
Realised surplus on disposal of 22 949 29 253
investment property
Unrealised surplus on revaluation of 6 372 4 764
interest rate swap
Straight-line rental income accrual 6 252 46 366
Unrealised surplus on revaluation of 833 038 509 760
investment property
Unrealised surplus on revaluation of 101 941 -
investment in securities
Net income before taxation 1 231 703 772 274
Taxation 6 662 13 239
Earnings 1 225 041 759 035
Number of units in issue(`000) 205 107 183 356
Number of weighted average units in 196 703 183 356
issue(`000)
Earnings per unit in cents 622.79 413.97
RECONCILIATION OF EARNINGS, HEADLINE EARNINGS AND DISTRIBUTABLE EARNINGS
Earnings 1 225 041 759 035
Realised surplus on disposal of (22 949) (29 253)
investment property
Unrealised fair value adjustments (941 231) (463 394)
Taxation 6 662 13 239
Headline earnings 267 523 279 627
Straight line rental income accrual 6 252 (46 366)
Unrealised surplus on revaluation of (6 372) (4 764)
interest rate swap
Distribution clawback 9 333 -
Distributable earnings 276 736 228 497
Headline earnings per unit in cents 136.00 152.50
Distribution per unit in cents 134.92 124.62
Distributions per unit
No. 43 for period ended 30 Sep 2006 - 108 913
of 59.40 cents per unit
No. 44 for period ended 31 March 2007 - 119 584
of 65.22 cents per unit
No. 45 for period ended 30 Sep 2007 131 572 -
of 64.15 cents per unit
No. 46 for period ended 31 March 2008 145 164 -
of 70.77 cents per unit
276 736 228 497
CONDENSED BALANCE SHEET
Audited as at Audited as at
31 Mar 08 31 Mar 07
(R`000) (R`000)
ASSETS
Non-current assets
Investment property including straight
line rental income accrual 4 426 016 3 480 037
Investment property under development 72 162 -
Investment in securities 360 252 -
Total non-current assets 4 858 430 3 480 037
Current assets
Rental and other receivables 38 889 20 589
Other financial assets 11 136 4 764
Cash and cash balances 108 838 108 031
Total current assets 158 863 133 384
Total assets 5 017 293 3 613 421
UNITHOLDERS` FUNDS AND LIABILITIES
Unitholders` funds
Unitholders` capital 1 661 828 1 281 486
Non-distributable reserves 2 590 174 1 632 536
Total capital and reserves 4 252 002 2 914 022
Non-current liabilities
Unsecured borrowings 562 087 529 298
Total non-current liabilities 562 087 529 298
Current liabilities
Trade and other payables 51 382 37 277
Taxation payable 6 662 13 239
Unitholders for distribution 145 160 119 585
Total current liabilities 203 204 170 101
Total liabilities 765 291 699 399
Total unitholders` funds and
liabilities 5 017 293 3 613 421
Net asset value per unit in cents 2 073 1 589
Weighted average net asset value 2 161 1 589
per unit in cents
CONDENSED STATEMENT OF CHANGES IN UNITHOLDERS FUNDS
Non
Distri-
butable Retained
Capital Reserve Income Total
(R`000) (R`000) (R`000) (R`000)
Balance as at 1 Apr 06 1 281 486 1 101 998 - 2 383 484
Earnings - - 759 035 759 035
Transfer to non-distri-
Butable reserve - 530 538 (530 538) -
Unitholders distribution - - (228 497) (228 497)
Balance as at 31 Mar 07 1 281 486 1 632 536 - 2 914 022
Units issued 382 084 - - 382 084
Units issue cost (1 742) - - (1 742)
Distribution clawback - - 9 333 9 333
Earnings - - 1 225 041 1 225 041
Transfer to non-distri-
butable reserve - 957 638 (957 638) -
Unitholders distribution - - (276 736) (276 736)
Balance at 31 Mar 08 1 661 828 2 590 174 - 4 252 002
CONDENSED CASHFLOW STATEMENT
Audited Audited
as at as at
31 Mar 08 31 Mar 07
(R`000) (R`000)
Cash generated from operating 300 750 286 149
activities
Interest received 18 992 10 521
Interest paid (63 315) (49 122)
Taxation paid (13 239) -
Distribution paid (241 828) (221 786)
Net cash inflow from operating 1 360 25 762
activities
Cash flows from investing
activities
Additions to investment (254 030) (175 424)
and development property
Additions to investment in (258 311) -
securities
Proceeds on disposal of investment 98 657 185 748
property
Net cash (outflow)/inflow from (413 684) 10 324
investing activities
Cash flows from financing
activities
Increase in issued capital 380 342 -
Decrease in borrowings 32 789 (12 203)
Net cash inflow/(outflow) from 413 131 (12 203)
financing activities
Net increase in cash and cash 807 23 883
equivalents
Cash and cash equivalents at the 108 031 84 148
beginning of the period
Cash and cash equivalents at the 108 838 108 031
end of the period
NOTES
1. ACCOUNTING POLICIES
The audited financial report has been prepared in accordance with the
requirements ofInternational Financial Reporting Standard ("IFRS"),
International Accounting Standards 34: Interim Reporting ("IAS 34"), the JSE
Listings Requirements, 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, with the exception of
property operating costs that are reflected net of municipal recoveries. The
prior year`s audited results were restated by reducing rental income and
property operating costs by R38,6m. The results have been audited by the
auditors of the Fund, Deloitte & Touche and their unmodified opinion is
available for inspection at the registered office.
2. PRIMARY OPERATIONAL SEGMENTS FOR THE YEAR ENDED 31 MARCH 2008
Retail Office Fund Total
(R`000) (R`000) (R`000) (R`000)
Rental income 218 973 170 850 - 389 823
Straight-line rental income 15 476 (21 728) - (6 252)
accrual
Dividend income 6 516 - - 6 516
Total revenue 240 965 149 122 - 390 087
Expenditure (37 860) (28 271) (22 574) (88 705)
Net finance cost 904 2 313 (43 448) (40 231)
Net operating income 204 009 123 164 (66 022) 261 151
Fair value adjustments 970 552
Taxation (6 662)
Earnings 1 225 041
Investment property 2 563 016 1 935 162 - 4 498 178
Investment in securities 360 252 - - 360 252
Current assets 15 846 22 249 120 768 158 863
Total assets 2 939 114 1 957 411 120 768 5 017 293
Unsecured borrowings - - (562 087) (562 087)
Current liabilities (10 411) (29 714) 17 919 (58 044)
Unitholders distribution - - (145 160) (145 160)
Total liabilities (10 411) (29 714) (725 166) (765 291)
Total capital and reserves 2 928 703 1 927 697 (604 398) 4 252 002
3. PRIMARY OPERATIONAL SEGMENTS FOR THE YEAR ENDED 31 MARCH 2007
(Restated)
Retail Office Fund Total
(R`000) (R`000) (R`000) (R`000)
Rental income 183 946 169 982 - 353 928
Straight-line rental income
accrual 32 515 13 851 - 46 366
Total revenue 216 461 183 833 - 400 294
Expenditure (31 593) (36 386) (20 125) (88 104)
Net finance cost 768 583 (38 678) (37 327)
Net operating income 185 636 148 030 (58 803) 274 863
Fair value adjustments 497 411
Taxation (13 239)
Earnings 759 035
Investment property 1 973 140 1 506 897 - 3 480 037
Current assets 9 370 11 107 112 907 133 384
Total assets 1 982 510 1 518 004 112 907 3 613 421
Unsecured borrowings - - (529 298) (529 298)
Current liabilities (14 746) (23 499) (12 271) (50 516)
Unitholders distribution - - (119 585) (119 585)
Total liabilities (14 746) (23 499) (661 154) (699 399)
Total capital and reserves 1 967 764 1 494 505 (548 247) 2 914 022
4. INVESTMENT PROFILE
Rental Income Net Income
(R`000) % (R`000) %
Somerset Mall 58 394 15.0% 49 581 14.9%
(50% undivided share)*
Harrowdene Office Park* 46 188 11.8% 37 029 11.1%
Vaal Mall 44 497 11.5% 36 997 11.0%
(77.86% undivided share)*
Sold properties 4 004 1.0% 3 232 1.0%
Other Properties 236 740 60.7% 206 586 62.0%
Total 389 823 100.0% 333 425 100.0%
(*Properties contributing more than 10% to net income)
MANAGEMENT COMMENTARY
1. Results
The distributable earnings for the six months ended 31 March 2008 amounted to
70.77 cents per unit, which represents growth of 8.5% over the 65.22 cents per
unit distribution for the same period in the previous year. The distribution for
the full year is 134.92 cents per unit which represents growth of 8.3% over the
previous year and is in line with guidance.
The property portfolio was independently valued at year end and developments
valued at cost, resulting in a revaluation surplus of R833m. The net asset value
of the Fund increased by 30.5% over the previous year to 2 073 cents per unit.
At the closing market price at 31 March 2008, the units are trading at a
discount of 15.2% to net asset value. The favourable valuation is indicative of
the quality of the portfolio.
The investment in Stenham European Shopping Centre Fund IC (SESCF) was revalued
by the directors. The valuation was based on the appreciation of the underlying
property and the weakening of the Rand/Euro exchange rate at 31 March 2008. The
SESCF dividend of R6.5m is in line with expectations and has benefitted from the
exchange rate.
2. Operations
The property portfolio has experienced good net income growth of 13.2%. Property
expenses came down and is 16.8% of rental income compared to 19.0% in the
previous year. The portfolio of of 296 664m2 remained almost fully let with a
vacancy of 1.1%, with 9.3% of leases expiring in the next twelve months, at an
average rental of R133/m2. The market rental is estimated at R161/m2.
2.1 Retail portfolio
The retail portfolio`s aggregated net income is in line with budget, while
maintaining a low vacancy of 1.03%. Leases totalling 5 545m2 were concluded at
an average rental of R234/m2, escalating at an average of 7% per annum. The
retail portfolio contributes 64.0% to net income and represents 60.2% of assets
by value.
2.2 Office portfolio
The Office portfolio`s aggregated net income exceeded the budget expectations.
The vacancy remained low at 1.2%. Leases totalling 9 249m2 were concluded at an
increased average rental of R111/m2, escalating at an average 8.7% per annum.
Upward reversions of expiring letable area in the office sector is anticipated
in the next twelve months.
3. Stenham European Shopping Centre Fund IC (SESCF)
The investment in SESCF appreciated by R19m due to the revaluation of the
underlying property and a further R83m from a foreign exchange gain. The
underlying property is performing in line with expectations and will contribute
a full twelve months income in the next financial year.
4. Developments
The Woodlands Office Park developments, comprising four buildings totalling 31
880m2 (Sycom share 12 752m2), will be completed on a phased basis during the
year at a projected aggregated initial yield of 11%.
An additional 900m2, yielding 12% was added at Somerset Mall, at a cost of R7,8m
(Sycom share R3,9m). This reflects a continuing programme to improve space and
bulk utilisation in the property portfolio.
5. Funding
At 31 March 2008 the Fund`s capital borrowings amounted to R562m. The
outstanding Woodlands Office Park development commitment is R67m. A further
sundry capital expenditure R37m is committed. The above will be funded from the
Funds` loan facility of R950m. The Fund hedged 71% of the debt using interest
rate swap agreements. The interest rate expiry profile of the Fund is shown
below
Amount Interest %of
(R million) rate(%) borrowings
Expiry date
1 June 2009 100.0 8.99 17.79%
1 June 2010 100.0 9.10 17.79%
17 March 2012 200.0 11.35 35.58%
Fixed interest rates 400.0 10.20 71.16%
Floating interest rate
(Prime less 2.5%) 162.1 12.50 28.84%
Unsecured borrowings 562.1 10.86 100.00%
The Fund concluded a further interest rate swap agreement after year end for
R100m over 6 years at an effective interest rate of 10.51%.
6. Prospects
Management continue to explore investment opportunities in the office and retail
sector. In addition, management continues to focus on maximising value
generated from the high quality property portfolio and identifying asset
redevelopment. The projected distribution growth for the year ahead should be
similar to the growth experienced in the current year.
7. Subsequent events
Unitholders are referred to the SENS Announcement released on 9 May 2008 setting
out the financial effects on Acucap Properties Limited, for the acquisition of
17.5% of the units in Sycom Property Fund and 50% of Sycom Property Fund
Managers Limited. The Fund will benefit from improved economies of scale due to
joint asset management, increased development opportunities and unlocking growth
potential.
8. Distribution declaration
Notice is hereby given of the declaration of distribution No.46 in respect of
the six months to 31 March 2008 of 70.77 cents per unit. The last day to trade
cum distribution will be Friday, 6 June 2008 and the units will trade ex-
distribution from the commencement of business on Monday, 9 June 2008. The
record date is Friday, 13 June 2008 and payment will be made to unitholders on
Tuesday, 17 June 2008. Unitholders may not dematerialise their units between
Monday, 9 June 2008 and Friday, 13 June 2008 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: TE Sewell (Chairman)*, NFJ
Haasbroek (Chief Executive Officer), FM Berkeley*, JPD Flanagan*, GA Nelson*, L
Norval, Ms SJ Wentzel.
*Independent non-executive
Registered Office:
Parkdev Building
Brooklyn Bridge
570 Fehrsen Street
Brooklyn
PO Box 39068
Faerie Glen, 0043
Sponsor:
Nedbank Capital
Sponsor Unit
135 Rivonia Road
Sandton, 2196
Auditors:
Deloitte & Touche
Waterkloof House
221 Waterkloof Road
0181
Pretoria
Transfer Secretaries:
Computershare Investor
Services(Pty) Ltd
70 Marshall Street
Johannesburg, 2001
PO Box 61051
Pretoria Marshalltown, 2107
22 May 2008
Date: 22/05/2008 17:05:01 Produced by the JSE SENS Department.
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