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SYC
SYC
SYC - Sycom - Summarised Audited Group Results and Declaration of the Final
Distribution for the year ended 31 March 2012
Sycom Property Fund ("Sycom")
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)
JSE Share code: SYC
ISIN: ZAE000019303
SUMMARISED AUDITED GROUP RESULTS AND DECLARATION OF THE FINAL DISTRIBUTION FOR
THE YEAR ENDED 31 MARCH 2012
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 2012.
SUMMARISED STATEMENT OF FINANCIAL POSITION
Audited Audited
at at
31 Mar 31 Mar
2012 2011
(R`000) (R`000)
ASSETS
Non-current assets
Investment property
6 114 228 5 570 533
Listed investment
236 756 213 803
Deferred taxation
96 -
Total non-current assets
6 351 080 5 784 336
Current assets
Rental and other receivables
71 329 58 991
Cash and cash equivalents
882 055 129 134
Total current assets
953 384 188 125
Total assets
7 304 464 5 972 461
UNITHOLDERS` FUNDS AND
LIABILITIES
Unitholder`s funds
Unitholders` capital
2 579 048 1 863 856
Non-distributable reserves
3 383 147 3 036 451
Total capital and reserves
5 962 195 4 900 307
Non-current liabilities
Borrowings
833 466 800 902
Deferred Tax
- 1 498
Total non-current liabilities
833 466 802 400
Current liabilities
Trade and other payables
259 604 66 696
Derivative financial
instruments 36 366 31 212
Unitholders for distribution
212 833 171 846
Total current liabilities
508 803 269 754
Total liabilities
1 342 269 1 072 154
Total unitholders` funds and
liabilities 7 304 464 5 972 461
Net asset value per unit -
cents 2 398 2 267
Audited Audited
twelve months twelve
to 31 Mar months to
2012 31 Mar
2011
(R`000) (R`000)
SUMMARISED STATEMENT OF COMPREHENSIVE
INCOME
Revenue 544 157 493 355
Contractual rental revenue and 529 820 493 397
recoveries
Straight lining of rental revenue 14 337 (42)
adjustment
Direct property operating expenses (97 009) (85 379)
Net rental and related revenue 447 148 407 976
Investment income 13 781 10 700
Fair value changes on investment 335 919 294 764
property and listed investment
Fair value gain on investment 312 966 386 297
properties
Net change in fair value of listed 22 953 (91 533)
investment
Administrative expenses (30 412) (27 683)
Service Charge (28 040) (25 998)
Other administrative expenses (2 372) (1 685)
Profit before net finance costs 766 436 685 757
Net finance costs (33 288) (54 701)
Interest income 40 847 18 449
Interest expense (68 981) (70 781)
Net change in fair value of derivative (5 154) (2 369)
financial instruments at fair value
through profit and loss
Profit before taxation 733 148 631 056
Taxation 1 594 (1 498)
Profit for the year 734 742 629 558
Number of units in issue (`000) 248 604 216 182
Weighted number of units (`000) 220 256 214 898
Earnings per unit - cents 333.59 291.22
RECONCILIATION OF EARNINGS TO HEADLINE
EARNINGS AND DISTRIBUTABLE EARNINGS
Total comprehensive income 734 742 629 558
Unrealised surplus on revaluation of (314 560) (384 799)
investment properties, net of deferred
tax
Headline Earnings 420 182 244 759
Straight-line rental income accrual (14 337) 42
Unrealised deficit on derivative 5 154 2 369
financial instruments
Unrealised (surplus)/ deficit on (22 953) 91 533
revaluation of listed investment
Distributable earnings 388 046 338 703
Annual Earnings per unit:
Basic earnings per unit- cents
333.59 291.22
Headline earnings per unit - cents
190.77 113.22
Annual Distribution per unit - cents
166.66 156.67
Distribution per unit for the six
months ended 30 September 2011: 81.05 77.18
Distribution per unit for the six
months ended 31 March 2012 85.61 79.49
SUMMARISED STATEMENT OF
CHANGES IN UNITHOLDERS
FUNDS
Capital Non Retained Total
distribut earnings
able
reserve
(R`000) (R`000) (R`000) (R`000)
Balance at 31 1 661 615 2 745 596 4 407 211
March 2010 -
Transactions with
owners, recorded
directly in equity
Issue of 8 897 297 157 283 157 283
units in April - -
2010
Issue for 157 286 157 286
acquisition of - -
Tyger Hills Office
Park (Pty) Ltd
Capital issue
costs (3) - - (3)
Issue of 1 396 657 28 930 28 930
units in September - -
2010
Proceeds 29 886 29 886
- -
Capital issue
costs (956) - - (956)
Issue of 780 078 16 028 16 028
units in September - -
2010
Proceeds 16 517 16 517
- -
Capital issue
costs (489) - - (489)
Total profit or 629 558 629 558
loss and - -
comprehensive
income for the
year
Transfer to non- 290 855 (290 855)
distributable - -
reserve
Unitholders (338 703) (338 703)
distribution - -
Balance at 31 1 863 856 3 036 451 4 900 307
March 2011 -
Transactions with
owners, recorded
directly in equity
Issue of 32 422 715 192 715 192
638 units on 16 - -
February 2012
Proceeds 745 721 745 721
- -
Prepaid (20 877) (20 877)
distribution on - -
issue
Capital issue (9 652) (9 652)
costs - -
Total 734 742
comprehensive - - 734 742
income for the
year
Transfer to non- 346 696
distributable - (346 696) -
reserve
Unitholders (388 046)
distribution - - (388 046)
Balance at 31 2 579 048 3 383 147 5 962 195
March 2012 -
SUMMARISED STATEMENT OF CASH FLOWS
Audited at Audited at
31 Mar 2012 31 Mar
2011
(R`000) (R`000)
Cash generated from/ (utilised in)
operating activities
Cash generated from operations 586 580 356 481
Interest received 9 582
19 970
Interest paid (73 891) (68 329)
Dividend received 8 905
13 198
Distribution paid (347 059) (342 776)
Net cash inflow/ (outflow) from 198 798 (36 137)
operating activities
Cash flows from investing
activities
Additions to investment property (214 336) (28 462)
Subscription to rights issue- SESCF (91 557)
-
Net cash outflow from investing (214 336) (120 019)
activities
Cash flows from financing
activities
Proceeds on issue of new units, net 736 069 46 509
of capital issue costs
Increase in borrowings 86 578
32 564
Net cash inflow from financing 768 633 133 087
activities
Net increase/ (decrease) in cash 753 095 (23 069)
and cash equivalents
Cash and cash balances at the 129 134 152 203
beginning of the year
Effect of exchange rate (174)
fluctuations on cash held -
Cash and cash equivalents at the 882 055 129 134
end of the year
BASIS OF PREPARATION AND AUDIT OPINION
The summarised financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS), the AC500 series issued by
the Accounting Practices Board and IAS 34 and interpretations adopted by the
International Accounting Standards Board (IASB) and the Collective Investment
Schemes Control Act, 2002.
The summarised financial statements are prepared on the historical cost basis,
except for investment properties, investment properties held for sale,
derivative financial instruments, and financial assets carried at fair value
through profit or loss which are measured at fair value.
The summarised financial statements are prepared on the going concern basis and
Sycom`s accounting policies have been applied consistently to all periods
presented.
KPMG Inc. has audited the financial information set out above. Their unmodified
audit report is available for inspection at the company`s registered office. The
information contained in the commentary below does not form part of the audit
opinion.
COMMENTARY
1. REVIEW OF RESULTS AND OPERATIONS
The board of Sycom Property Fund Managers Limited is pleased to report a
distribution of 85.61 cents per unit (cpu) for the six months ended 31
March 2012. Together with the interim distribution of 81.05 cpu, this gives
unitholders an annual distribution of 166.66 cpu, an increase of 6.4% over
the 2011 financial year.
Office market
The "A" grade office market continued to improve during the period under
review, with the vacancy rate declining sharply from 11.7% at 31 March 2011
to 5.1% at the end of the current financial year. Leases were concluded on
70,859m2 of GLA during the year, at an average net rate of R124.54/m2. This
was 5% lower than the average net expiry rental of R131.13/m2 on the
59,702m2 which terminated over this period. The extent of the negative
reversion was less than forecast, and there are signs of rentals firming as
vacancies decline.
Retail
Sycom`s South African retail portfolio generated sales revenue growth of
6.6% for the year to 31 March 2012. Vaal Mall once again showed the
strongest sales revenue growth at 8.4%, with Paarl Mall at 7.6%, Somerset
Mall at 6.6%, N1 City at 5%, and Fourways Crossing at 4.8%. Although
Fourways showed the lowest growth, its performance was generally very
pleasing, and the reduction in turnover was principally the result of a
single large vacancy at the upper level that has proved difficult to re-
let.
Segmental contribution to retail sales revenue for the year is shown in the
chart below. It reflects a combined contribution of 57.1% from supermarkets
(food majors) and apparel, slightly higher than the 56.1% from last year
and comparable to the 57.5% in 2010.
Segment: % of Turnover 2011 2012
Apparel 30.8% 32.0%
Food Majors 25.3% 25.1%
Electronics & Music 11.7% 11.5%
Health & Beauty 9.3% 9.0%
Food Service & Entertainment 7.1% 7.2%
Other 5.7% 5.6%
Home Decor & Improvement 4.9% 4.9%
Discounters 5.2% 4.7%
The homeware and electronics segments delivered lower growth rates over the
prior year, although this was not unexpected after their extremely strong
performances in the 2011 financial year. Discounters showed a 2.5% decline
in sales revenue as discretionary spend contracted in favour of food and
apparel. The apparel segment showed sales revenue growth of just under 10%,
and supermarkets gave a much improved performance, doubling their revenue
growth from 2.7% in the prior year to 5.4% for the current year.
Year-on-Year Year-on-Year
2010/11 2011/12
Total Turnover 6.5% 6.6%
Food Majors 2.7% 5.4%
Apparel 6.9% 9.4%
Home 16.0% 7.0%
Electronics 9.0% 4.4%
Discounters 3.7% -2.6%
Health & Beauty 6.6% 3.4%
Food Service 6.6% 11.0%
The rent to sales revenue ratios remain comfortably within accepted norms
for the reported segments. Overall, the picture emerging from the analysis
of these ratios is that tenant sales revenues are growing comfortably in
line with rentals.
Rent Ratio Rent Ratio
2011 2012
Food Majors 1.9% 1.9%
Apparel 6.6% 6.5%
Home 8.4% 9.2%
Electronics 2.9% 3.3%
Discounters 3.8% 4.0%
Health & Beauty 2.7% 2.8%
Food Service 9.2% 8.7%
During the year under review, leases totalling 44,511m2 terminated at an
average rental of R157.33/m2. Renewals were completed at an average rental
of R163.25/m2, a positive reversion of 3.8%. The retail vacancy remained
fairly constant over the year at approximately 2%. Expiries in the 2013
financial year will amount to 20,850m2, terminating at an average rental of
R200/m2. Based on the specific mix of these expiries, they are expected to
be renewed at an average rate of R217/m2.
2. BORROWINGS
Sycom has an approved total facility of R1650 million. Sycom`s gearing
level, adjusted for the acquisition of 30% of Paarl Mall and the Kraft
Foods building at Harrowdene, is presently 6.3%. Including the effects of
its investment in SESCF, Sycom`s `see-through` gearing level is 13.1%. The
board would be comfortable to increase the overall level of gearing to
approximately 30%, and Sycom is therefore well-placed to fund acquisition
and redevelopment opportunities.
Maturity Date Effective Value % of total
Type
Rate R`m
SWAP 1 June 2012 8.74% 100.0 24.975%
SWAP 17 Mar 2014 11.12% 200.0 49.950%
SWAP 9 April 2014 10.83% 100.0 24.975%
400.0 99.900%
Floating 25 November 6.50% 0.4 0.100%
2014
400.4 100.00%
3. STENHAM EUROPEAN SHOPPING CENTRE FUND (`SESCF`)
SESCF`s sole investment is the 96,000m2 Nova Eventis shopping centre in
Leipzig. The centre continues to show signs of the improving retail climate
in Germany, with low vacancies and stable rentals. SESCF will be re-
capitalised by its shareholders through a rights issue to be undertaken
during July 2012. The funds raised will be used to settle debt and reduce
the gearing level. Sycom expects to follow its rights, resulting in an
additional investment of approximately R75m in SESCF. This will reduce the
gearing level to 60%, down from 80%, before the partial recapitalisation in
September 2010. SESCF is finalising the terms of a new 4 year loan at an
interest rate of 3 month Euribor plus 320bps.
At 31 March 2012, Nova Eventis was independently valued by BulweinGesa
Valuation at Euro310m, a 3% increase on last year`s valuation. In the
interests of prudence, the SESCF directors have elected not to increase the
book value of the asset from its currently stated Euro300m.
4. LEASE EXPIRIES FOR THE NEXT 12 MONTHS
After the high leasing activity in the 2012 financial year, the lease
expiry profile (by rental income) shows that more than 50% of leases have
an expiry of more than three years.
Total Mar- Mar- Mar- Mar- Mar- thereafter
2013 2014 2015 2016 2017
Retail 51.7% 9.6% 10.0% 8.3% 10.4% 10.4% 3.0%
Offices 48.3% 6.7% 7.1% 8.1% 7.8% 16.9% 1.7%
Total 100.0% 16.3% 17.1% 16.4% 18.2% 27.3% 4.7%
5. VACANCIES AND BAD DEBTS
The table below provides details of Sycom`s vacancies at March 2011 and
March 2012, expressed by area.
Mar-12 Mar-11
Retail vacancy 2.2% 1.7%
Office vacancy 5.1% 11.7%
Total vacancy 3.7% 6.6%
By rental income, Sycom`s vacancies were 3.1% at 31 March 2012, with 1.9%
of the total attributable to offices and 1.2% to retail assets.
The impairment provision at 31 March 2012 amounted to R1.24m compared to
R2.22m at 31 March 2011, with the difference of R980 000 applied to writing
off bad debts of R1.74m (2011: 3.09m). The bad debt and tenant arrears
positions have remained stable and the board does not expect any abnormal
provisions or write offs to become necessary as the economic climate
continues to slowly improve.
6. UNIT HOLDER SUMMARY
Sycom`s major unit holders at 31 March 2012 are shown below, with a
comparison to the prior year.
Major unitholders
31-Mar-2012 31-Mar-2011
Hyprop 33.9% 34.8%
Acucap 17.2% 19.8%
GEPF 4.8% 6.0%
Investec Asset 5.9% 0.1%
Management
Stanlib 5.2% 3.9%
67.0% 64.6%
7. PROSPECTS
In terms of its strategy, Sycom continues to seek opportunities that will
enhance shareholder value, including the expansion of retail assets that
are performing well and have further bulk rights, acquiring additional
shares in co-owned assets as opportunities arise, and by acquiring good
quality office and retail properties that offer sound long-term growth
prospects. Underlying rental growth remains sound in the retail portfolio,
but office rentals are still under pressure, with downward reversions on
renewals dampening contractual rental growth. Sycom`s gearing level is low,
in anticipation of significant acquisition activity in the 2013 financial
year. Accordingly, the board expects distribution growth for the next
financial year to be in the order of 5%. In the longer term, with
normalised office vacancies and firming `A` grade rentals, and with gearing
closer to 30%, growth in distributions can be expected to move into the 5%
to 7% range, in line with the potential of Sycom`s high quality property
portfolio.
The above information has not been reviewed or reported on by Sycom`s
auditors.
8. PAYMENT OF INTEREST
Notice is hereby given of the declaration of interest distribution number
54 in respect of the six months to 31 March 2012. The final distribution of
85.61 (eighty five comma six one) cents per unit has been approved in
respect of the six month period ended 31 March 2012. The last date to trade
the units cum distribution is Friday, 22 June 2012 and the record date will
be Friday, 29 June 2012. The units will start trading ex-distribution from
Monday, 25 June 2012. Distributions will be made to unit holders on Monday
2 July 2012.
Unit certificates may not be dematerialised or rematerialised between
Monday 25 June 2012 and Friday 29 June 2012 both days inclusive.
On behalf of the Board
G K EVERINGHAM PA THEODOSIOU
Chairman CEO
Sycom Property Fund Managers Ltd Sycom Property Fund
Managers Ltd
7 June 2012
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 : ZAE000019303
Directors: GK Everingham (Chairman), MS Moloko (Deputy Chairman), FM Berkeley,
JPD Flanagan,
BM Stocks, PA Theodosiou*# (CEO), CB Marlow*, GR Jones*
Company Secretary: H H-O Steyn
* Executive, # British
Sponsor
Nedbank Capital
Date: 07/06/2012 07:05:01 Produced by the JSE SENS Department.
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