| Thu 8 May 2003, 10:30 | | Reviewed Group Results |
|
Sycom Property Fund Managers Limited -
Sycom Property Fund Managers Limited
JSE share code: SYC
ISIN: ZAE000019303
Reviewed group results and declaration of a third and final distribution for the
fifteen months ended 31 March 2003
15 Months 12 Months
ended ended
31 Mar 2003 31 Dec 2002
INCOME STATEMENT (R"000) (R"000)
Revenue 303 961 218 763
Rental income 290 343 208 126
Interest received 13 618 10 637
Expenditure 99 479 65 910
Operating income 204 482 152 853
Net fair value adjustments 1 618 77 063
Realised surplus / (deficit) on 141 010 (469)
disposal of fixed investment properties
Unrealised revaluation deficit written - (444)
back on disposal of fixed investment
properties
Unrealised (deficit) / surplus on (139 392) 77 976
revaluation of investments in fixed
investment properties
Net income before taxation 206 100 229 916
Taxation ( 4 981)
Earnings 201 119 229 916
Units in issue ("000) 169 598 146 800
Weighted average units in issue 159 837 139 682
Earnings per unit - cents (weighted 125.83 164.60
average units in issue)
Headline earnings per unit - cents 124.82 109.43
(weighted average units in issue)
Distributable earnings per unit - cents 129.53 103.11
Distributable earnings per unit - cents 130.29 103.22
(weighted average units in issue)
Reconciliation of headline earnings to
distributable earnings
Headline earnings 199 501 152 853
Net fair value adjustments 1 618 77 063
Earnings 201 119 229 916
Net transfer from / (to) reserves 7 133 (85 737)
Transfer from / (to) non-distributable 7 487 (77 063)
reserve
Transfer to distributable reserve (354) (8 674)
Distributable earnings 208 252 144 179
Distributions
No. 32 of 50,06 cents per unit paid 66 302
September 2001
No. 33 of 53.05 cents per unit paid 77 877
March 2002
No. 34 of 50,13 cents per unit paid 73 591
July 2002
No. 35 of 53.27 cents per unit paid 90 345
March 2003
No. 36 of 26.13 cents per unit proposed 44 316
May 2003
208 252 144 179
BALANCE SHEET As at As at
31 Mar 2003 31 Dec 2002
Assets
Investment properties at fair value 1 424 256 1 217 692
Current assets 78 341 120 696
Total assets 1 502 597 1 338 388
Unitholders" funds and liabilities
Capital and reserves 1 420 238 1 249 653
Interest bearing borrowings 17 887 -
Deferred taxation 741 -
Current liabilities 63 731 88 735
Total unitholders" funds and liabilities 1 502 597 1 338 388
STATEMENT OF CHANGES IN CAPITAL AND RESERVES
Balance at beginning of the period 1 249 653 832 975
Units issued 177 718 330 941
Net income after taxation 201 119 229 916
Income distributions (208 252) (144 179)
Balance at end of the period 1 420 238 1 249 653
Net asset value per unit 8.37 8.51
CASH FLOW STATEMENT
Cash generated by operations 201 165 142 216
Change in working capital 25 767 (4 778)
Cash generated from operating activities 226 932 137 438
Net interest received 12 421 10 637
Distributions paid (241 813) (118 814)
Net cash (outflow) / inflow from operating (2 460) 29 261
activities
Issue of units 177 718 330 941
Borrowings 17 887 -
Disposals of investment property 59 600 11 500
Additions to investment property (280 369) (361 426)
Net cash outflow from investment and (25 164) (18 985)
financing activities
(Decrease) / Increase in cash resources (27 624) 10 276
Cash resources at beginning of the period 86 211 75 935
Cash resources at end of the period 58 587 86 211
Notes
1. Accounting policies
The results for the period are prepared in accordance with South African
Statements of Generally Accepted Accounting Practice and are consistent with
those accounting policies used in the prior year except for the valuation of
investment properties at fair value in accordance with AC 135. The results have
been reviewed by the auditors of the fund, Deloitte & Touche and their
unqualified review opinion is available for inspection at the registered office.
2. Interest bearing borrowings
The fund has signed surety in favour of its bankers, in respect of a loan
granted to its wholly owned subsidiary company Fairy Glen Properties (Pty) Ltd,
which at the year-end amounted to R17.9 million.
3. Primary operational segments for the fifteen months ended 31 March 2003
Retail Office Warehouse Fund Total
Rental income 139 530 149 855 958 290 343
Interest 973 580 12 065 13 618
Total revenue 140 503 150 435 958 12 065 303 961
Expenditure 42 977 44 709 976 10 817 99 479
Operating 97 526 105 726 (18) 1 248 204 482
income/(loss)
Net fair 1 618
value
adjustments
Taxation (4 981)
Net income 201 119
after
taxation
Investment
properties at
fair value 103 400 475 900 5 000 839 956 1 424 256
Current 6 330 12 816 104 59 091 78 341
assets
Interest - (17 887) - - (17 887)
bearing
borrowings
Deferred (403) (338) - - (741)
taxation
Current (5 741) (8 119) (151) (49 720) (63 731)
liabilities
Net assets 103 586 462 372 4 953 849 327 1 420 238
Comments
1. Results
Sycom"s net distributable income for the fifteen months ended 31 March 2003
amounted to 129,53 cents per unit. Annualised, this equates to 103,62 cents per
unit, an improvement of 0,5% over the previous year"s distribution of 103,11
cents per unit.
The portfolio was again independently valued as at 31 March 2003. Current
stresses in the physical property market have resulted in a general softening of
market capitalisation rates across all sectors and coupled with pressure on
rentals, particularly in the office market, has resulted in a notional decline
in property values generally over the past fifteen months. The net asset value
of the Fund now stands at 837 cents per unit.
As at 31 December 2001, major maintenance reserves stood at Rm14,85. Transfers
from the reserve to cover major maintenance expenditure for the fifteen-month
period amount to Rm0,77 and amounts written back on sold properties totalled
Rm0,94. Further reserves totaling Rm2,07 have been created resulting in a
balance of Rm15,20.
2. Operations
The high level of vacancies in the decentralised office market has negatively
affected the overall performance of the portfolio over the fifteen-month period.
As a result of the prevailing high level of interest rates and muted economic
activity for most of last year, returns from the retail sector while still
showing positive growth, have generally been less than expected.
The SAPIX/IPD* South African property index figures for the year to December
2002 have recently been released and Sycom"s relative rankings in terms of
overall property returns annualised over three and five year periods, are 1st
and 2nd respectively.
(*The SAPIX/IPD index measures the performance of 17 portfolios representing a
capital value of R47 billion.)
Market vacancy rates in the Johannesburg decentralised office market are still
at high levels of around 13% and this continues to impact on achievable rentals,
although there are early signs of a turnaround with increased demand. From
levels of around 11,1% at December 2001, the Fund"s vacancies deteriorated to
12,8% over the first six months of the period under review and have subsequently
improved to 9,9%. Much of this improvement is due to the acquisition of
properties with no vacancy and disposal of properties with high vacancies.
3. Property portfolio
As reported in previous announcements, the Fund acquired six office properties
during the period under review, totaling Rm236,6. The purchase consideration was
settled by way of the issue of 22 797 998 new Sycom units at 780 cents per unit
and the balance of Rm54,5 by way of existing capital cash resources and drawing
down part of the Rm400 loan facility raised by Sycom.
Again as previously reported, the Fund disposed of two properties for a total
consideration of Rm59,6 against book values totalling Rm61,0.
A conditional offer to purchase the following 11 properties from the Fund for a
total consideration of Rm165 has been received: Systems House; 7 Wellington
Road; CU House; Morning Glen Shopping Centre; The Atrium; Natech; Primovie Park;
Southdale Shopping Centre; Highway Gardens; 110 Hamilton Street; Mount Royal.
Unitholders will be advised in due course if this transaction proceeds.
The Fund has also entered into an agreement to acquire an office building for
Rm150, to be developed on the Cape Town foreshore near the new Convention
Centre. The building will comprise 13 800m2 of
A-grade office accommodation and 1 700m2 of ground floor retail. Construction is
due to commence in May 2003 with completion by end October 2004. 72% of the
offices have been pre-let of which 7 000m2 (51%) comprises a 10-year lease with
attorneys Sonnenberg Hoffmann Galombik. This flagship property is expected to
produce an initial yield of 12,6%.
The Fund"s FNB and Boart buildings, which are located on prime adjoining sites
in Fredman Drive Sandton, will undergo a major refurbishment at a total cost of
approximately Rm112. The new combined building will offer approximately 21 000m2
of A-grade accommodation and is expected to show an initial yield of 12,5%.
All the above initiatives are in line with management"s objective of further
reshaping the portfolio, which is strategically focusing on regional shopping
centres as the retail component, and large office properties with good covenant
tenants.
The fund commenced utilisation of its Rm400 loan facility during the period
under review to fund various acquisitions and capital projects. To this end,
Rm17,9 had been utilised by the end of the period and sundry capital projects
totalling Rm24,6 have been committed to.
4. Prospects
Over the next twelve months the portfolio has a relatively low expiry profile of
14,0% by area with the office and retail sectors being 10,6% and 19,3%
respectively. While renewals in respect of the retail properties are not of
concern, the office market is likely to continue labouring from an oversupply
situation for some time to come. To this end, management continues to focus on
tenant retention, coupled with ongoing marketing campaigns and refurbishment
programmes for a number of the Fund"s buildings.
Overall, growth in annualised distributions for the twelve-month period to 31
March 2004 is likely to be of the order of 3%.
5. Restructure
With the introduction of the Collective Investments Schemes Control Act of 2002,
Sycom, as required by the Act, has adopted, with effect from 31 March 2003, a
new Trust Deed, which will be standard for the industry. A copy may be obtained
at the registered office. The Trust is in the process of taking transfer of a
number of properties from the Fixed Property Companies. While this will trigger
minimal capital gains tax of Rm4,4 in the companies this restructuring ensures
that Sycom will not in the future incur any liability for this tax arising from
the disposal of these properties. The abovementioned capital gains tax liability
has been accounted for in net asset value.
6. Distribution declaration
Notice is hereby given of the declaration of distribution No.36 in respect of
the three months to 31 March 2003 of 26,13 cents per unit. The last date to
trade cum dividend will be Friday, 23 May 2003 and the units will trade ex-
dividend from the commencement of business on Monday, 26 May 2003. The record
date is Friday, 30 May 2003 and payment will be made to unitholders on Monday, 2
June 2003. Unitholders may not dematerialise or rematerialise their units
between Monday, 26 May 2003 and Friday, 30 May 2003, both days inclusive.
By order of the Board
Sycom Property Fund Managers Limited
(Registration number 1986/002756/06)
7 May 2003
Directors: TE Sewell* (Chairman), GA Nelson (MD), R Abramowitz*,
MS Aitken*, FM Berkeley*, JPD Flanagan*, CJV Fleming, LA Meyerowitz*, BM
Roberts*, MJ Watters* * Non-executive
Registered Office:
1st Floor, Building 2
Freestone Park
135 Patricia Road
Sandown 2146
PO Box 4795, Rivonia, 2128
Auditors:
Deloitte & Touche
Deloitte & Touche Place
The Woodlands
Woodlands Drive
Woodmead, Sandton
Transfer Secretaries:
Computershare Investor Services Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown 2107
