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SYC
SYC
SYC - Sycom Property Fund - Unaudited Interim Results for the 6 months ended 30
September 2009
SYCOM PROPERTY FUND
JSE SHARE CODE: SYC
ISIN NO: ZAE000019303
Unaudited Interim Results for the 6 months ended 30 September 2009
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 2009.
30 31 March 30 September
September 2009 2008
2009 Audited Unaudited
Unaudited
R`000 R`000 R`000
Abridged consolidated
statement of financial
position
Assets
Non-current assets 4 954 533 4 989 241 4 873 143
Investment properties 4 648 688 4 576 339 4 476 399
Investment properties 38 100 96 890 65 171
under development
Investment in 267 745 316 012 331 573
securities
Current assets 174 704 179 931 164 334
Trade and other 36 357 40 116 38 979
receivables
Other financial assets - - 1 395
Cash and cash 138 347 139 815 123 960
equivalents
Total assets 5 129 237 5 169 172 5 037 477
Equity and liabilities
Unitholders` interest 4 211 133 4 254 759 4 214 250
Unitholders` capital 1 661 828 1 661 828 1 661 828
Non-distributable 2 549 305 2 592 931 2 552 422
reserve
Non current liabilities 709 423 685 879 637 165
Unsecured Financial 709 423 685 879 685 879
liabilities
Current liabilities 208 681 228 534 186 062
Trade and other 32 690 43 375 39 450
payables
Financial liabilities 17 766 22 407 -
Tax payable - 231 1 744
Unitholders for 158 225 162 521 144 868
distribution
Total equity and 5 129 237 5 169 172 5 037 477
liabilities
Net asset value per
unit (Rand) 20.53 20.74 20.55
Abridged consolidated
statement of comprehensive
income
for the 6 months ended 30
September 2009
6 months year ended 6 months
ended 31 March ended
30 2009 30 September
September 2008
2009
Unaudited Audited Unaudited
R`000 R`000 R`000
Revenue 244 096 437 666 214 050
- Contractual 227 067 430 995 209 732
- Straight lining 11 670 ( 4 997) ( 999)
- Dividend income 5 359 11 668 5 317
Net operating expenses ( 48 044) ( 92 117) ( 48 719)
- Administrative ( 1 439) ( 1 257) ( 1 070)
expenditure
- Auditors` remuneration ( 184) ( 767) ( 194)
- Property management fees ( 7 649) ( 14 558) ( 6 465)
- Property expenses ( 28 727) ( 56 132) ( 31 355)
- Service charge ( 10 045) ( 19 403) ( 9 635)
Profit before fair value
adjustments,
interest and taxation 196 052 345 549 165 331
Profit / (loss) on disposal ( 64) 668
of investment properties
Fair value adjustment to - 79 091
investment properties
Fair value adjustment to ( 11 670) 4 997 999
investment properties -
straight lining
Fair value adjustment to ( 48 267) ( 44 240) ( 28 679)
investment in securities
Fair value adjustment to 4 641 ( 33 543) ( 9 741)
interest rate swap
Profit before interest and 140 756 351 790 128 578
taxation
Net Finance cost ( 26 157) ( 43 157) ( 21 462)
Profit before taxation 114 599 308 633 107 116
Taxation 1 513
Profit for the period 114 599 310 146 107 116
Other comprehensive income/ -
(expense)
Total comprehensive income 114 599 310 146 107 116
for the period
Reconciliation of profit for
the period to headline
earnings
Profit for the period 114 599 310 146 107 116
Profit / (loss) on disposal 64 ( 668)
of investment properties
Fair value adjustment to ( 79 091)
investment properties
Fair value adjustment to 48 267 44 240 28 679
investment in securities
Fair value adjustment to 11 670 ( 4 997) ( 999)
investment properties -
straight lining
Tax effects
Headline profit 174 536 270 362 134 128
Fair value adjustment to ( 4 641) 33 543 9 741
interest rate swap
Fair value adjustment to ( 11 670) 4 997 999
investment properties -
straight lining
Taxation ( 1 513)
Distributable earnings 158 225 307 389 144 868
Cents Cents Cents
Earnings per unit
55.87 151.21 52.22
Headline earnings per unit
85.10 131.82 65.39
Distribution per unit
77.14 149.87 70.63
Distributions 158 225 310 389 144 868
No 47 of 70.63 cents - 144 868 144 868
per unit
No 48 of 79.24 cents - 165 521 -
per unit
No 49 of 77.14 cents 158 225 - -
per unit
Number of units in issue 205 107 471 205 107 471 205 107 471
Abridged Consolidated statement
of changes in Capital and
Reserves
for the 6 months
ended 30 September
2009
Capital Non Retained Total
Distributable earnings
Reserve
R`000 R`000 R`000 R`000
Balance at 31 March 1 661 828 2 590 174 4 252 002
2008
Total comprehensive
income for the period
Profit for the period 107 116 107 116
Total comprehensive - - 107 116 107 116
income for the period
Transactions with
owners, recorded
directly in equity
Unitholders` ( 144 868) ( 144 868)
distribution
Transfer from non- ( 37 752) 37 752 -
distributable reserve
Total transactions - ( 37 752) ( 107 116) ( 144 868)
with owners
Balance at 30 1 661 828 2 552 422 - 4 214 250
September 2008
Total comprehensive
income for the period
Profit for the period 203 030 203 030
-
Total comprehensive - - 203 030 203 030
income for the period
Transactions with
owners, recorded
directly in equity
Unitholders` ( 162 521) ( 162 521)
distribution
Transfer to non- 40 509 ( 40 509) -
distributable reserve
Total transactions - 40 509 ( 203 030) ( 162 521)
with owners
Balance at 31 March 1 661 828 2 592 931 - 4 254 759
2009
Total comprehensive
income for the period
Profit for the period 114 599 114 599
-
Total comprehensive - - 114 599 114 599
income for the period
Transactions with
owners, recorded
directly in equity
Unitholders` ( 158 225) ( 158 225)
distribution
Transfer from non- ( 43 626) 43 626 -
distributable reserve
Total transactions - ( 43 626) ( 114 599) ( 158 225)
with owners
Balance at 30 1 661 828 2 549 305 - 4 211 133
September 2009
Abridged Cash flow statement
for the 6 months ended 30
September 2009
6 months year ended 6 months
ended 31 March ended
30 2009 30 September
September 2008
2009
R`000 R`000 R`000
Cash flows from operating
activities
Cash generated by operations 179 297 344 146 156 664
Interest received 5 000 16 167 14 129
Interest paid ( 31 157) ( 67 157) ( 35 591)
Dividend received 6 350 11 834 6 516
Distribution paid ( 162 521) ( 290 028) ( 145 160)
Income tax paid ( 231) ( 4 918) ( 4 918)
Net cash (outflows) / inflows ( 3 262) 10 044 ( 8 360)
from operating activities
Cash outflows from investing ( 21 750) ( 102 859) ( 51 596)
activities
Cash inflows from financing 23 544 123 792 75 078
activities
Net cash inflows for the period ( 1 468) 30 977 15 122
Cash and cash equivalents at 139 815 108 838 108 838
beginning of period
Cash and cash equivalents at 138 347 139 815 123 960
end of period
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 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 2009
Retail Office Fund Total
(R`000) (R`000) (R`000) (R`000)
Rental income
124,490 102,577 - 227,067
Straight-line rental income
accrual 2,949 8,721 - 11,670
Dividend income
5,359 - - 5,359
Total revenue
132,798 111,298 - 244,096
Expenditure
22,792 13,584 11,668 48,044
Net finance cost
(347) (450) 26,954 26,157
Net operating income
110,353 98,164 (38,622) 169,895
Fair value adjustments
(55,296)
Earnings
114,599
Investment in property and
securities 2,806,004 2,148,529 - 4,954,533
Current assets
1,219 14,170 159,315 174,704
2,807,223 2,162,699 159,315 5,129,237
Unsecured Borrowings
- - 709,423 709,423
Current liabilities
5,128 22,357 22,971 50,456
Unitholders distribution
- - 158,225 158,225
5,128 22,357 890,619 918,104
Total capital and reserves
2,802,095 2,140,342 (731,304) 4,211,133
3. 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
124,223 89,827 - 214,050
Expenditure
21,493 15,946 11,280 48,719
Net finance cost
(325) (435) 22,222 21,462
Net operating income
103,055 74,316 (33,502) 143,869
Fair value adjustments
(36,753)
Earnings
107,116
Investment in property and
securities 2,896,473 1,976,670 - 4,873,143
Current assets
3,458 11,051 149,825 164,334
2,899,931 1,987,721 149,825 5,037,477
Unsecured Borrowings
- - 637,165 637,165
Current liabilities
4,782 33,860 2,552 41,194
Unitholders distribution
- - 144,868 144,868
4,782 33,860 784,585 823,227
Total capital and reserves
2,895,149 1,953,861 (634,760) 4,214,250
4. MAJOR PROFIT GENERATING
PROPERTIES*
Rental Income Net Income
(R`000) % (R`000) %
Somerset Mall (50% 14.2% 13.6%
undivided share) 32,291 26,015
The Woodlands Office Park 14.0% 14.3%
(40% undivided share) 31,868 27,425
Vaal Mall (77.86% undivided 12.9% 12.8%
share) 29,231 24,476
Harrowdene Office Park 11.1% 11.1%
25,097 21,193
Other 47.8% 48.2%
108,580 92,379
Total 100.0% 100.0%
227,067 191,488
* Properties contributing more than
10% to Rental Income
1. REVIEW OF RESULTS AND OPERATIONS
The board of SPFM is pleased to announce an increase in distribution for
the six months ended 30 September 2009 of 9.2% over that of the same period
last year. These results are attributable to good performances from both
the retail and office portfolios. At the retail level, tenant turnovers
grew by 5.6%, with footcounts unchanged, and turnover rental received was
26% ahead of budget. Operating costs were well contained, and cost
recoveries were on budget, although the board remains concerned about the
weak economic climate, and comprehensive provisions have accordingly been
made for doubtful debts, as detailed in section 8 below.
2. PORTFOLIO ACTIVITIES
There were no new developments or acquisitions in the period under review,
with most effort focused around leasing activities. Strong leasing activity
saw more than 20,000m2 of renewals and new leases successfully concluded in
the six month period under review. In total, this means that over 6% of
Sycom`s portfolio by Gross Lettable Area (GLA) was renewed or leased in
this period. Given the prevailing weak economic conditions, the result
underlines the quality of the Sycom portfolio and the defensiveness of its
assets. Full details of Sycom`s leasing activity are set out in section 6
below.
3. BORROWINGS
Sycom has an approved facility of R950 million. The facility is subject to
renewal in November 2014. At 30 September 2009, R709 million of this
facility had been utilised, resulting in a gearing ratio of 15%, against
the statutory limit of 30%. Just over 70% of borrowings are subject to
interest rate swaps, as tabulated below, and the overall weighted average
borrowing cost is 10.15%.
Type Maturity Date Effective Value % of
total
Rate R`000
SWAP 1 June 2011 9.67% 14.1%
100,000
SWAP June 2012 9.54% 14.1%
100,000
SWAP 17 Mar 2014 11.92% 28.2%
200,000
SWAP 9 April 2014 11.63% 14.1%
100,000
70.5%
500,000
Floating 31 November 2014 8.00% 29.5%
209,423
10.15% 709,423 100.0%
4. STENHAM EUROPEAN SHOPPING CENTRE FUND (`SESCF`)
At 30 September 2009, Sycom`s investment in SESCF was valued at R268m
compared with its March 2009 value of R316m. The decline in value over this
period was due a strengthening in the exchange rate of the Rand against the
Euro from R12.57 to the Euro at the end of March 2009 to R10.83 to the Euro
at the end of September.
In terms of income, the dividend from SESCF for the six months ended 30
September 2009 was R5.4m compared to R6.4m in the prior period. Net rental
income from the 96,000m2 Nova Eventis shopping centre in Germany, SESCF`s
sole asset, is expected to remain flat in the next financial year, and the
dividend received from SESCF is likely to change only under the influence
of the Rand / Euro exchange rate.
Gearing in SESCF stands at 69% of the value of the underlying asset. The
interest rate is 4.825% and the loan funding is repayable on 18 July 2011.
5. SOUTH AFRICAN RETAIL PORTFOLIO PERFORMANCE
The eight defined segments in Sycom`s South African retail portfolio
contributed to total retail turnover as shown in the chart below, with food
and apparel making up nearly 60% of all turnover.
Food majors 27.5%
Apparel 30.7%
Home & Furniture 4.6%
Electronics & Music 10.1%
Mass Discounters 5.0%
Health & Beauty 9.4%
Food, Service & 7.4%
Entertainment
Other 5.3%
100.0%
Compared to the segmental contribution for the year to March 2009, the
health and beauty segment was again the best performer, with its
contribution to turnover increasing from 8.7% to 9.4%. The contribution
from food majors and apparel retailers was much the same as at March 2009,
but the home and furniture segment showed a marginal decline, while the
contribution from mass discounters retreated more significantly from 5.7%
down to 5%, showing the effects of the pressure on durable goods sales and
discretionary spending.
Overall, retail turnover to 30 September 2009 showed a growth of 5.5% over
the same period last year, and whilst the South African consumer is likely
to remain under pressure for the remainder of the financial year, Sycom`s
large exposure to the food majors, apparel, health and beauty and
electronics segments, which now comprise nearly 80% of its retail sales,
should ensure further growth in turnovers as consumer spending gravitates
to these segments.
6. LEASE EXPIRY AND RENEWALS OVER THE LAST 6 MONTHS
The pattern of lease expiries and renewals for the South African portfolio
over the last 6 months is shown in the table below. In the office
portfolio, the opening vacancy was 2,649m2, new space of 7,531m2 was added
to the portfolio, and 13,838m2 expired during the period. Renewals and new
leases for 11,648 m2 were concluded, leaving a vacancy of 12,370m2, or 8.4%
of office GLA. This vacancy is due principally to the Veld Estates
development at Woodlands coming on stream only partially let, and also to a
3,000m2 increase in the vacancy at Riverwoods Office Park. Subsequent to
the period end, leases have been concluded for 1,138m2, Full details on
vacancies are set out in section 8 below.
The expiring office leases terminated at an average rental of R98/m2, and
renewals and new leases were concluded at an average of R100/m2.
In the retail portfolio, 7,557m2 expired during the year at an average net
rental of R216.52/m2, and 8,330m2 was let or renewed at an average of
R215.96/m2 net, with the retail vacancy decreasing from 1.5% to 1.0% by
GLA.
Offices Retail Total
31-Mar-09 Let m2 137,161 158,776 295,937
Vacant m2 2,649 2,438 5,087
Total m2 139,810 161,214 301,024
Additions m2 7,531 0 7,531
Expiries m2 13,838 7,557 21,395
Ave 98 216
R/m2
New lets & m2 11,648 8,330 19,978
renewals
Ave 100 216
R/m2
30-Sep-09 Let m2 134,971 159,549 294,520
Vacant m2 12,370 1,665 14,035
Total m2 147,341 161,214 308,555
7. FORWARD LEASE EXPIRIES
Sycom`s forward lease expiry profile for the next 12 months is tabulated
below :
Total Expiry Weighted %
next Weighted
area 12 % expiry market
months rent rent change
Retail 16.8%
portfolio 161,214 27,061 171 177 3.2%
Office 10.9%
portfolio 147,341 16,055 103 97 (6.2%)
Over the next 5 years, the retail portfolio shows a consistent and
relatively low expiry profile. There will be negligible office expiries in
2011, but another relatively high expiry year in 2012, by which time an
expected improvement in the economic climate should facilitate leasing
activities at or above exit rental levels.
Offices Retail Total
Mar-10 5.5% 8.4% 13.9%
Mar-11 4.3% 14.6% 18.9%
Mar-12 15.3% 12.4% 27.6%
Mar-13 2.0% 5.1% 7.1%
Mar-14 5.5% 4.9% 10.4%
Mar-15 1.1% 2.2% 3.3%
Mar-16 11.4% 7.2% 18.6%
8. VACANCIES AND BAD DEBTS
The table below provides full details of Sycom`s vacancies at the end of
September 2009, compared with the position at the March 2009 year end. The
vacancies are expressed by area and by income. Average net rentals for both
the retail and office portfolios are also shown. The vacancy by rental
income has increased from 1.7% on 31 March 2009 to 4.5% at the end of
September 2009.
Average rentals for the retail portfolio are relatively low, at R124.93/m2.
For the office portfolio, the average is considered close to market for the
portfolio as a whole, although any softening in office rentals will expose
potential over-rents, with the associated reversionary risk.
Bad debts written off for the six months to 30 September 2009 represent
1.76% of rental income and amount to R4,063,647. For the full year to 31
March 2009, the bad debt write off was R2,119,924. In addition, the
provision for doubtful debts has been increased by R2.5m.
Vacancy by GLA
Sector 30-Sep-09 31-Mar-09
Lettable Vacant Vacant Lettable Vacant Vacant
(m2) (m2) (%) (m2) (m2) (%)
Retail 161,214 1,665 1.0% 161,214 2,438 1.5%
Offices 147,341 8.4% 139,810 2,649 1.9%
12,370
Total 308,555 4.5% 301,024 5,087 1.7%
14,035
Vacancy by
rental
Sector 30-Sep-09 31-Mar-09
Lettable Vacant Vacant Lettable Vacant Vacant
(R) (R) (%) (R) (R) (%)
Retail 20,289 357 1.8% 19,457,932 350,055 1.80%
Offices 17,650 1,278 7.8% 16,231,448 259,942 1.60%
Total 37,939 1,635 4.5% 35,689,380 609,997 1.71%
Average rental
rates
Sector 30-Sep-09 31-Mar-09
Lettable Vacant Lettable Vacant
(R/m2) (R/m2) (R/m2) (R/m2)
Retail 125.85 214.32
120.70 142.53
Offices 119.79 103.36
116.10 98.80
9. UNIT HOLDER SUMMARY
Sycom`s major unit holders at the end of September 2009 are shown below,
with a comparison to the March year end :
Major unitholders
September 2009 March 2009
Hyprop 36.7% 36.7%
Acucap 18.3% 18.3%
Redefine 3.2% 3.2%
Investec 1.5% 5.5%
PIC 4.0% 3.4%
Nedbank 2.8% 2.8%
Old Mutual 2.6% 2.9%
Stanlib 3.3% 2.5%
72.4% 75.3%
10. PROSPECTS
Expectations of an early recovery in the South African economy have been
deferred, with positive GDP growth now only anticipated in the first
quarter of 2010. Nonetheless, the local economy seems to have escaped the
worst effects of the global downturn, and good quality commercial real
estate has remained relatively unscathed. Retail rentals, however, are
likely to remain flat, and occupancy levels could be tested until consumer
spending picks up. Conditions are also expected to remain difficult in the
office market, and Sycom still has significant office renewals to conclude
in the second half of the financial year. The board therefore expects
distribution growth for the full year to be in the order of 8%. The
forecast information on which this statement has been based has not been
reviewed or reported on by Sycom`s auditors.
11. PAYMENT OF INTEREST
Notice is hereby given of the declaration of distribution number 49 in
respect of the six months to 30 September 2009. The distribution is paid
out of property income which is classified as interest from a unitholder`s
perspective for SARS reporting purposes The distribution of 77.14 (seventy
seven comma one four) cents per unit has been approved in respect of the
six month period ended 30 September 2009. The last date to trade the units
cum distribution is Friday, 27 November 2009 and the record date will be
Friday, 4 December 2009. The units will start trading ex-distribution from
Monday 30 November 2009. Distributions will be made to unit holders on
Monday 7 December 2009.
Unit certificates may not be dematerialised or rematerialised between Monday 30
November and Friday 4 December 2009 both days inclusive.
On behalf of the Board
T E SEWELL PA THEODOSIOU
(Chairman) (CEO)
13 November 2009
Registered Office
Suite A11 Westlake Square
Westlake Drive
Westlake
CAPE TOWN
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited
70 Marshall Street
JOHANNESBURG
http://www.sycom.co.za
Share Code: SYC
ISIN : ZAE 000019303
Directors: TE Sewell (Chairman), FM Berkeley, JPD Flanagan, GA Nelson, L Norval
*, NFJ Haasbroek*, SJ Wentzel*, PA Theodosiou* (CEO), GR Jones*, C B Marlow*
* Executive
Date: 13/11/2009 12:52:01 Produced by the JSE SENS Department.
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