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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 2008
SYCOM PROPERTY FUND
JSE SHARE CODE: SYC
ISIN NO: ZAE000019303
- DISTRIBUTION GROWTH 10.1%
- REVENUE GROWTH 13.8%
UNAUDITED GROUP RESULTS AND DECLARATION OF THE INTERIM DISTRIBUTION FOR THE SIX
MONTHS ENDED 30 SEPTEMBER 2008
The directors of Sycom Property Fund Managers Limited (SPFM), 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 2008
Unaudited six Unaudited Audited
months 30 Sep six twelve
2008 months 30 months to
Sep 2007 31 Mar
2008
(R`000) (R`000) (R`000)
CONDENSED INCOME STATEMENT
Revenue 214,050 194,255 390,087
Rental income 209,732 190,397 389,823
Straight-line rental (999) 3,858 (6,252)
income accrual
Dividend income 5,317 - 6,516
Expenditure 48,720 47,330 88,705
Administrative 1,070 763 1,161
expenditure
Auditors` remuneration 194 167 935
Property management fees 6,465 6,313 13,002
Property expenses 31,356 29,727 52,517
Service charge 9,635 10,360 21,090
Net Property Income 165,330 146,925 301,382
Net finance cost 21,462 20,824 40,231
Net Income before fair value 143,868 126,101 261,151
adjustments
Realised surplus on 668 23,162 22,949
disposal of investment
property
Unrealised (deficit) / (9,741) 4,016 6,372
surplus on revaluation of
interest rate swap
Straight-line rental 999 (3,858) 6,252
income accrual
Unrealised surplus on - - 833,038
revaluation of investment
property
Unrealised (deficit) / (28,679) - 101,941
surplus on revaluation of
investment in securities
Net Income before taxation 107,115 149,421 1,231,703
Taxation - - 6,662
Earnings 107,115 149,421 1,225,041
Number of units in issue 205,107 205,107 205,107
(`000)
Number of weighted average 205,107 188,298 196,703
units in issue (`000)
Earnings per unit - cents 52.22 72.85 597.27
Weighted average earnings per 52.22 79.35 622.79
unit - cents
RECONCILIATION OF EARNINGS, HEADLINE EARNINGS AND
DISTRIBUTABLE EARNINGS
Earnings 107,115 149,421 1,225,041
Realised surplus on (668) (23,162) (22,949)
disposal of investment
property
Unrealised surplus on - - (833,038)
revaluation of investment
property
Unrealised surplus on 28,679 - (101,941)
revaluation of investment
in securities
Straight-line rental (999) 3,858 (6,252)
income accrual
Taxation - - 6,662
Headline Earnings 134,127 130,117 267,523
Straight-line rental 999 (3,858) 6,252
income accrual
Unrealised surplus on 9,741 (4,016) (6,372)
revaluation of interest
rate swap
Distribution clawback - 9,333 9,333
Distributable earnings 144,867 131,576 276,736
Headline earnings per unit - 65.39 63.44 130.43
cents
Weighted headline earnings per 65.39 69.10 136.00
unit - cents
Distribution per unit - cents 70.63 64.15 134.92
Distributions
No. 45 of 64.15 cents per - 131,576 131,576
unit
No. 46 of 70.77 cents per - - 145,160
unit
No. 47 of 70.63 cents per 144,867 - -
unit
144,867 131,576 276,736
CONDENSED BALANCE SHEET
Unaudited at Unaudited at Audited at
30 Sep 2008 30 Sep 2007 31 Mar 2008
(R`000) (R`000) (R`000)
ASSETS
Non-current assets
Investment property 4,476,399 3,579,765 4,426,016
Investment property 65,171 36,440 72,162
under development
Investment in 331,573 257,588 360,252
securities
Total non-current assets 4,873,143 3,873,793 4,858,430
Current assets
Rental and other 38,979 47,481 38,889
receivables
Other financial 1,395 8,780 11,136
assets
Cash and cash 123,960 105,926 108,838
equivalents
Total current assets 164,334 162,187 158,863
Total assets 5,037,477 4,035,980 5,017,293
UNITHOLDERS` FUNDS AND
LIABILITIES
Unitholder`s funds
Unitholders` capital 1,661,828 1,661,962 1,661,828
Non-distributable 2,552,422 1,659,714 2,590,174
reserves
Total capital and 4,214,250 3,321,676 4,252,002
reserves
Non-current liabilities
Unsecured borrowings 637,165 525,125 562,087
Total non-current 637,165 525,125 562,087
liabilities
Current liabilities
Trade and other 39,451 44,364 51,382
payables
Taxation payable 1,744 13,239 6,662
Unitholders for 144,867 131,576 145,160
distribution
Total current 186,062 189,179 203,204
liabilities
Total liabilities 823,227 714,304 765,291
Total unitholders` funds 5,037,477 4,035,980 5,017,293
and liabilities
Net asset value per unit 2,055 1,619 2,073
- cents
Weighted average net 2,055 1,764 2,162
asset value per unit -
cents
CONDENSED STATEMENT OF CHANGES IN CAPITAL AND
RESERVES
Capital Non Retained Total
distributable earnings
reserve
(R`000) (R`000) (R`000) (R`000)
Balance at 1 April 07 1,281,486 1,632,536 - 2,914,022
Units issued 382,084 - - 382,084
Unit issue cost (1,608) - - (1,608)
Distribution clawback - 9,333 9,333
Earnings - - 149,417 149,417
Transfer to non- - 27,178 (27,178) -
distributable reserve
Unitholders - - (131,572) (131,572)
distribution
Balance at 30 September 1,661,962 1,659,714 - 3,321,676
2007
Unit issue cost (134) (134)
Earnings 1,075,624 1,075,624
Transfer to non-
distributable reserve 930,460 (930,460) -
Unitholders
distribution (145,164) (145,164)
Balance at 31 March 2008
1,661,828 2,590,174 - 4,252,002
Earnings
107,115 107,115
Transfer from non-
distributable reserve (37,752) 37,752 -
Unitholders
distribution (144,867) (144,867)
Balance at 30 September
2008 1,661,828 2,552,422 - 4,214,250
CONDENSED CASH FLOW
STATEMENT
Unaudited six Unaudited Audited
months 30 Sep six twelve
2008 months 30 months to
Sep 2007 31 Mar
2008
(R`000) (R`000) (R`000)
Cash generated from
operating activities
Cash generated from
operating activities 156,664 134,110 300,750
Interest received
14,129 10,952 18,992
Interest paid
(35,591) (31,776) (63,315)
Dividends received
6,516 - -
Distribution paid
(145,160) (119,585) (241,828)
Taxation paid
(4,918) - (13,239)
Net cash (outflow)/inflow
from operating activities (8,360) (6,299) 1,360
Cash flows from investing
activities
Additions to
investment property (51,596) (213,345) (254,030)
and development
property
Additions to
investment in - (257,588) (258,311)
securities
Proceeds on disposal
of investment property - 98,657 98,657
Net cash outflow from
investing activities (51,596) (372,276) (413,684)
Cash flows from financing
activities
Increase in issued
capital - 380,643 380,342
Increase/(decrease) in
borrowings 75,078 (4,173) 32,789
Net cash inflow from
financing activities 75,078 376,470 413,131
Net increase/(decrease) in
cash and cash balances 15,122 (2,105) 807
Cash and cash balances at the
beginning of the period 108,838 108,031 108,031
Cash and cash equivalents
at the end of the period 123,960 105,926 108,838
NOTES TO THE FINANCIAL
STATEMENTS
1. ACCOUNTING POLICIES
The unaudited financial report has been prepared in accordance with the
requirements of International Financial Reporting Standards,
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.
2. PRIMARY OPERATIONAL SEGMENTS FOR THE SIX MONTHS ENDED 30
SEPTEMBER 2008
Retail Office Fund Total
(R`000) (R`000) (R`000) (R`000)
Rental income
118,065 91,667 - 209,732
Straight-line rental
income accrual 841 (1,840) - (999)
Dividend income
5,317 5,317
Total revenue
118,906 89,827 5,317 214,050
Expenditure
21,493 15,946 11,281 48,720
Net finance cost
(325) (435) 22,222 21,462
Net operating income
97,738 74,316 (28,186) 143,868
Fair value adjustments
(36,753)
Earnings
107,115
Investment property
2,896,473 1,976,671 - 4,873,144
Current assets
3,458 11,051 149,825 164,334
2,899,931 1,987,722 149,825 5,037,478
Unsecured Borrowings
- - 637,165 637,165
Current liabilities
4,782 33,860 2,554 41,196
Unitholders distribution
- - 144,867 144,867
4,782 33,860 784,586 823,228
Total capital and
reserves 2,895,149 1,953,862 (634,761) 4,214,250
3. 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
104,058 86,339 - 190,397
Straight-line rental
income accrual 8,634 (4,776) - 3,858
Total revenue
112,692 81,563 - 194,255
Expenditure
18,076 17,964 11,290 47,330
Net finance cost
(329) (1,565) 22,718 20,824
Net operating income
94,945 65,164 (34,008) 126,101
Fair value adjustments
23,320
Taxation
149,421
Earnings
Investment property
2,409,348 1,464,445 - 3,873,793
Current assets
24,105 36,904 101,178 162,187
2,433,453 1,501,349 101,178 4,035,980
Unsecured Borrowings
- - 525,125 525,125
Current liabilities
22,005 31,364 4,234 57,603
Unitholders distribution
- - 131,576 131,576
22,005 31,364 660,935 714,304
Total capital and
reserves 2,411,448 1,469,985 (559,757) 3,321,676
4. MAJOR PROFIT GENERATING
PROPERTIES*
Rental Income Net Income
(R`000) % (R`000) %
Somerset Mall (50% 14.2% 14.7%
undivided share) 29,791 25,274
Harrowdene Office Park 11.9% 12.4%
24,984 21,332
Vaal Mall (77.86% 12.3% 13.0%
undivided share) 25,733 22,339
The Woodlands Office Park 11.7% 11.7%
(40% undivided share) 24,440 20,101
Other 49.9% 48.2%
104,784 82,865
Total 100.0% 100.0%
209,732 171,911
* Properties contributing
more than 10% to Rental
Income
MANAGEMENT COMMENTARY
1. Results
The distributable earnings for the six months ended 30 September 2008 amounted
to 70.63 cents per unit which represents growth of 10.1% over the 64.15 cents
per unit distribution for the same period in the prior year. This is slightly
ahead of the guidance provided in the results release of 22 May 2008, and is due
partly to a stronger than expected performance from the retail portfolio, and
partly to a reduction in the asset management fee following a sharp decline in
listed property unit prices.
2. Operations
The property portfolio experienced good income growth of 10.5%. Property
expenses were contained at 18% of rental income. The lettable area increased by
4 360m2 to 301 024m2, due to the completion of phase 1 at The Woodlands Office
Park. Tenant demand for space reduced the vacancy in the portfolio from 1,10% in
March 2008 to 0,58% at the end of September. Leases expiring in the next 12
months represent 17.8% of the portfolio by lettable area, and lease negotiations
are in progress.
Management has undertaken to provide standby power at a cost of R30 million to
reduce the impact of power outages on its tenants. Somerset Mall, Vaal Mall,
Paarl Mall and The Woodlands Office Park will benefit from the installation
which is expected to be completed by March 2009. Costs will be recovered from
tenants who agree to participate in the standby power program, and the standard
terms and conditions on all new lease agreements have been amended to include a
recovery.
3. Retail Portfolio
Sycom remains strategically positioned in the retail sector, with its strong
defensive regional product offering. The September quarter showed a nominal 5%
increase in turnovers across Sycom`s retail portfolio over the same quarter last
year, but a 3% decline in footcounts. In real terms, this represents slightly
negative turnover growth, an indication of the more difficult retail
environment. The vacancy level remained low 1% or 1 678m2, and leases totalling
4 702m2 were concluded at an average net rental of R216/m2, escalating at an
average of 9.02%. The retail portfolio contributes 57% to net income. Leases
totalling 19 521m2 expire in the next 12 months, and in spite of more difficult
market conditions, renewal rentals are nonetheless expected to show satisfactory
growth.
4. Office Portfolio
The office portfolio`s aggregated net income exceeded budget expectations. The
vacancy remained low at 0.2% or 208m2. Leases totalling 11 398m2 were concluded
at an average rental of R101/m2 net, escalating at 8.59%. Lettable area of 34
126m2 expires in the next 12 months and upwards revisions to rentals in excess
of R110/m2 are expected.
5. Stenham European Shopping Centre Fund IC (SESCF)
The underlying property is revalued at year end and the investment in SESCF is
adjusted bi-annually for the exchange rate fluctuations. As at 30 September 2008
the value of the investment in SESCF reduced by R28 million due to a
strengthening Rand between March and September 2008. Subsequent to the period
end, the Rand has weakened significantly against the Euro, reversing the
reduction in investment value reported at 30 September.
The dividend declared and received for the six months to 30 September 2008 from
SESCF was higher than budgeted as a result of the solid performance of the
underlying property asset, the Nova Eventis shopping mall situated in Leipzig,
Germany.
The dividend declared and received for the six months to 30 September 2008 from
SESCF was higher than budgeted as a result of the solid performance of the
underlying property asset, the Nova Eventis shopping mall situated in Leipzig,
Germany.
6. Developments
The Woodlands Office Park development is progressing well and the final phase of
19 842m2 should be completed in March 2009 at an initial yield of 11%, with 12
038m2 already let. Negotiations are in progress to let the last building of 7
804m2 on completion.
7. Funding
At 30 September 2008 the Fund`s capital borrowings amounted to R637 million,
which represents a gearing level of 13%. The capital committed for the remainder
of this financial year amounts to R78 million, which includes the generator
installation. The balance is expected to be R715 million by yearend and remains
within the approved loan facility of R950 million.
The interest rate expiry profile of the group
is shown below:
30 Sept 30 Sept
2008 2007
Expiry Amount Interest Amount Interest
(Rmillion) rate (%) (Rmillion) rate (%)
1 June 2009
100.0 8.99 100.0 8.99
1 June 2011
100.0 9.10 100.0 9.10
17 March
2012 200.0 11.35 - -
10 April
2014 100.0 10.51 - -
Fixed
interest 500.0 10.26 200.0 9.05
rates
Floating
interest 137.2 13.00 362.1 11.50
rate (Prime
less 2.5%)
Gearing
637.2 10.85 562.1 10.63
8. Asset management and administration
Shortly before the end of the current six month reporting period, Acucap
Properties Limited (`Acucap`) received all the necessary regulatory approvals
for its acquisition of 50% of Sycom`s asset manager, and 100% of its property
administration business. A smooth transition has been completed, and on 24
October 2008, Paul Theodosiou and Gavin Jones were appointed to the Sycom board.
Paul has assumed the role of CEO with effect from 5 November 2008. In light of
Acucap`s representation on the Sycom board, and as previously disclosed, it has
been mutually agreed that Sycom and Acucap will be given equal opportunity to
participate in new property investments procured by either fund.
9. Prospects
Sycom`s commercial portfolio is well positioned to continue delivering solid
growth. The retail environment, however, is likely to become more challenging,
placing constraints on rental growth. There is also an increased risk of failure
amongst smaller tenants in certain retail segments, and management will continue
to monitor individual tenant performance closely to mitigate this risk. The
portfolio will also benefit from the combined expertise of Acucap and Parkdev as
asset managers.
Growth in the second half year is expected to remain comparable with that
achieved in the first period.
10. Distribution declaration
Notice is hereby given of the declaration of distribution No.47 in respect of
the six months to 30 September 2008 of 70.63 cents per unit. The last day to
trade cum distribution will be Friday, 21 November 2008 and the units will trade
ex-distribution from the commencement of business on Monday, 24 November 2008.
The record date is Friday, 28 November 2008 and payment will be made to unit
holders on Monday, 1 December 2008. Unit holders may not dematerialise their
units between Monday, 24 November and Friday, 28 November 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:
T Sewell (Chairman)*, NFJ Haasbroek ,
FM Berkeley*, JPD Flanagan*, GR Jones,
GA Nelson*, L Norval, PA Theodosiou
(CEO), Ms SJ Wentzel.
* non-executive
Registered Office:
Suite A11 Westlake Square
Westlake Drive
Wstlake
Cape Town
PO Box 31079, Tokai, 7966
6 November 2008
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 (Pty)
Ltd
70 Marshall Street
Johannesburg, 2001
PO Box 61051
Marshall Town, 2107
Date: 06/11/2008 16:02:11 Produced by the JSE SENS Department.
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