| Wed 5 May 2004, 18:07 | | EVIEWED GROUP RESULTS THE YEAR ENDED 31 MARCH 2004 |
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SYCOM PROPERTY FUND - REVIEWED GROUP RESULTS AND DECLARATION OF A FINAL
DISTRIBUTION FOR THE YEAR ENDED 31 MARCH 2004
Sycom Property Fund
JSE share code: SYC
ISIN: ZAE000019303
The directors of Sycom Property Fund Managers Limited, the management company of
Sycom Property Fund (Sycom) submit their report on the reviewed results of Sycom
for the year ended 31 March 2004.
REVIEWED GROUP RESULTS AND DECLARATION OF A FINAL DISTRIBUTION FOR THE YEAR
ENDED 31 MARCH 2004
INCOME STATEMENT
12 months 15 months 12 months
ended ended ended
31 Mar 2004 31 Mar 2003 31 Mar 2003
Proforma
Reviewed Audited Unaudited
(R"000) (R"000) (R"000)
Revenue 270 523 302 766 247 424
Rental income 252 047 290 344 237 610
Interest received 18 476 12 422 9 814
Expenditure 87 426 98 282 79 573
Operating income 183 097 204 484 167 851
Fair value adjustments 35 439 1 617 1 617
Realised deficit on (270) - -
disposal of investment in
fixed property companies
Realised deficit on (12 671) (7 012) (7 012)
disposal of investment
properties
Unrealised surplus on 218 536 206 101 169 468
revaluation of Net income
before taxation
Taxation (Deferred Capital (1 075) (4 982) (4 982)
Gains Tax and STC)
Earnings 217 461 201 119 164 486
EARNINGS AND DISTRIBUTIONS
Reconciliation of headline
earnings to distributable
earnings
Headline earnings 182 022 199 502 162 869
Fair value adjustments 35 439 1 617 1 617
Earnings 217 461 201 119 164 486
Net transfer (to)/from (27 424) 7 133 7 133
reserves
Transfer (to)/from non- (34 362) 7 487 7 487
distributable reserve
Transfer from /(to) 6 938 (354) (354)
distributable reserve
Distribution prepayment 6 191 - -
received
Distributable earnings 196 228 208 252 171 619
Units in issue ("000) 183 356 169 598 169 598
Weighted average units in 177 342 160 529 160 854
issue ("000)
Earnings per unit - cents 122.62 125.29 102.26
(weighted)
Headline earnings per unit 102.64 124.28 101.25
- cents (weighted)
Distributable earnings per 110.65 129.73 106.69
unit - cents (weighted)
Distributable earnings per 107.02 129.53 104.58
unit - cents
Distributions
No. 34 of 50,13 cents per - 73 591
unit paid July 2002
No. 35 of 53.27 cents per - 90 345
unit paid March 2003
No. 36 of 26.13 cents per - 44 316
unit paid May 2003
No. 37 of 52.46 cents per 96 189 -
unit paid December 2003
No. 38 of 54.56 cents per 100 039 -
unit proposed May 2004
196 228 208 252
BALANCE SHEET
As at As at
31 Mar 2004 31 Mar 2003
Reviewed Audited
(R"000) (R"000)
Assets
Investment properties at fair value 1 485 228 1 424 256
Current assets 204 675 60 455
Total assets 1 689 903 1 484 711
Unitholders" funds and liabilities
Capital and reserves 1 571 539 1 420 239
Deferred taxation - 741
Current liabilities 118 364 63 731
Total unitholders" funds and 1 689 903 1 484 711
liabilities
STATEMENT OF CHANGES IN CAPITAL AND RESERVES
12 months 15 months
ended ended
31 Mar 2004 31 Mar 2003
Reviewed Audited
(R"000) (R"000)
Balance at beginning of the period 1 420 239 1 249 653
Units issued 123 876 177 719
Earnings 217 461 201 119
Distribution prepayment received 6 191 -
Distributions (196 228) (208 252)
Balance at end of the period 1 571 539 1 420 239
CASH FLOW STATEMENT
12 months 15 months
ended ended
31 Mar 2004 31 Mar 2003
Reviewed Audited
(R"000) (R"000)
Cash generated by operations 164 621 192 062
Change in working capital (10 139) 19 046
Cash generated from operating 154 482 211 108
activities
Interest received 18 476 12 422
Distributions paid (140 505) (241 813)
Taxation paid (STC) (515) -
Net cash inflow/(outflow) from 31 938 (18 283)
operating activities
Issue of units 123 876 177 719
Disposal of investment property 111 450 59 600
Additions to investment property (136 984) (264 547)
Net cash inflow/(outflow) from 98 342 (27 228)
investment and financing activities
Distribution prepayment received 6 191 -
Increase/(decrease) in cash resources 136 471 (45 511)
Cash resources at beginning of the 40 700 86 211
period
Cash resources at end of the period 177 171 40 700
notes
1. ACCOUNTING POLICIES
The year-end results are prepared in accordance with South African Statements of
Generally Accepted Accounting Practice and are consistent with those accounting
policies used in the prior period. 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. PROFORMA UNAUDITED COMPARATIVES
Proforma unaudited results for the year ended 31 March 2003, prepared from
quarterly results presented to the board, have been shown for comparative
purposes.
3. 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,
on which no amount was owing at the end of March 2004.
4. PRIMARY OPERATIONAL SEGMENTS FOR THE YEAR ENDED 31 MARCH 2004
Retail Office Fund Total
Rental income 117 283 134 764 - 252 047
Interest 762 729 16 985 18 476
Total revenue 118 045 135 493 16 985 270 523
Expenditure 35 902 41 884 9 640 87 426
Operating income 82 143 93 609 7 345 183 097
Fair value 35 439
adjustments
Taxation (Deferred (1 075)
Capital Gains Tax and
STC)
Earnings 217 461
Investment properties 619 997 865 231 - 1 485 228
at fair value
Current assets 204 675 204 675
Current liabilities (118 364) (118 364)
Net assets 619 997 865 231 86 311 1 571 539
COMMENTS
1. RESULTS
Sycom"s distributable earnings for the year ended 31 March 2004 amounted to
107,02 cents per unit. This represents growth of 3,28% over the previous 15-
month period"s annualised distribution of 103,62 cents per unit. Compared to the
proforma earnings for the year ended 31 March 2003, the improvement amounts to
2,33%. The property portfolio was again independently valued at 31 March 2004 at
Rbn1,48, marginally higher than the comparable portfolio at 31 March 2003. While
the Fund"s retail portfolio reflected robust growth in capital values, this was
somewhat offset by a marginal drop in the overall office portfolio value.
Overall the net asset value of the Fund at 31 March 2004 stood at 857 cents per
unit compared to 837 cents per unit at 31 March 2003. As at 31 March 2003, major
maintenance reserves were Rm15,20. Transfers from the reserve for the year
amount to Rm2,04 and amounts released as a consequence of sold properties
totalled Rm4,89 resulting in a balance of Rm8,27 at 31 March 2004.
2. OPERATIONS
RETAIL PORTFOLIO - The sharp drop in interest rates during the second half of
2003, combined with lower inflation resulted in consistent improvements in real
disposable income for consumers. This has benefited the retail sector in terms
of improved turnovers for retailers generally. This has had a positive effect on
the performance of retail property which has been the best performing commercial
property category for a number of years. The Fund"s retail properties, which
account for just under 50% of net property income reflected this positive
performance with returns comfortably exceeding budgeted expectations. Vacancies
within the retail portfolio similarly showed further improvement, dropping to a
level of 1,0%.
OFFICE PORTFOLIO - The performance over the past year was affected by an
oversupplied office market with year-on-year income returns remaining relatively
flat. The recent improvement of take-up of offices in the Johannesburg
decentralised office market is encouraging as evidenced by the Fund"s office
portfolio vacancy reducing to 9,1%.
The Fund"s total vacancy at 31 March 2004 was 5,9% - down from 10,0% at March
2003.
3. PROPERTY PORTFOLIO
MAJOR PROJECTS - During the year, the Fund embarked on a development programme
comprising the following projects, which will be rolled out over the next
eighteen months:
SHG Building - Cape Town Foreshore
Construction of this 15 500m2, Rm152 flagship office building commenced in May
2003 and is on programme for completion in October 2004. The building is 80% pre
let, the bulk of which comprises a 10-year lease with attorneys Sonnenberg
Hoffman Galombik (SHG) and is expected to produce an initial return of 12,6%.
Oxford Place- Sandton CBD
The redevelopment of these two adjoining buildings is progressing well, and
terms have been agreed with Discovery Health for a seven-year lease over the
entire premises of 21 500m2. The redevelopment cost is estimated at Rm120 with
completion in February 2005 and the initial return is anticipated to be around
10,7%.
Somerset Mall Phase 3 - Somerset West (50% undivided share)
The 18 200m2 extension to Somerset Mall is due for completion in November 2004.
The anticipated final cost is Rm160, with a projected return in the first year
of approximately 12,5%. This additional space, which is presently 82% pre-let,
will boost the centre to a total rentable area of 69 500m2, thereby ensuring its
regional dominance.
Paarl Mall - Paarl (70% undivided share)
Construction of the new 35 500m2 regional shopping centre located adjacent to
the N1 motorway in Paarl at a cost of Rm290, is due to commence in June 2004.
Leasing commitments for 79% of the area have been secured and the anchor tenants
comprise Pick "n Pay, Woolworths and Edgars. The development is expected to show
a 12,0% return after completion in September 2005.
REFURBISHMENTS - During the year, major refurbishments were carried out at
Riverwoods Office Park and certain of the older buildings in Harrowdene Office
Park. Refurbishment of a number of the Woodlands Office Park buildings has
commenced and will be completed during the course of this year. Coupled with the
extensions at Somerset Mall, the interior of the existing centre is being
upgraded and a refurbishment of the N1 City shopping centre is being
investigated. Together with the recently completed refurbishment of Southgate
Mall, this ongoing programme will ensure that the Fund"s properties are
maintained at the highest standard.
4. PROPERTY SALES
During the year, eleven buildings that no longer met the Fund"s investment
criteria were sold for a total consideration of Rm157,0. Their valuations at the
time totaled Rm170,95. Transfer of seven of the buildings took place in the last
two months of the year under review with the remaining four effected after the
year-end. The sale proceeds will be applied to the aforementioned development
projects. The sale of these buildings leaves the Fund with a focused portfolio
of seventeen properties (including the new acquisitions and developments). These
remaining properties have the profile to provide the Fund with sustainable
growth in earnings and capital values into the future.
5. FUNDING
During the year under review, the Fund embarked on a capital raising exercise.
As previously announced, this resulted in the issue and listing of 13 758 239
new Sycom units on 8 September 2003 at an issue price of R9.10 per unit, thereby
raising Rm125,2. At 31 March 2004 the Fund had available capital of Rm85,9. Net
proceeds from the transfer of the remaining buildings effected after year-end
amount to Rm46,75. Capital commitments, including the aforementioned development
and refurbishment projects, amount to Rm430,2 over the next eighteen months.
This results in a funding requirement of Rm297,5, which is adequately covered by
way of the Fund"s existing Rm400 loan facility and will represent gearing of
approximately 16% of the value of the Fund"s assets.
6. PROSPECTS
Signs of an upturn in the office letting market should see an improvement in the
performance of this sector during the course of 2004. The Fund"s office vacancy
of around 9,1% should see further improvement over the next twelve months as
exposure to expiring leases over this period is low at 9% of rentable area.
The robust performance of retail property looks set to continue for the
foreseeable future. With current vacancies of 1,0% and a low lease expiry
profile of 7,4% over the next twelve months, the Fund is well positioned to
benefit from this performance.
The Fund"s current development activity will have a slight muting effect on
earnings growth until the developments come on stream, whereafter they are
significantly earnings enhancing. Overall, improved growth in distributions for
the year to 31 March 2005 over that for the year under review is expected.
7. DISTRIDUTION DECLARATION
Notice is hereby given of the declaration of distribution No.38 in respect of
the six months to 31 March 2004 of 54,56 cents per unit. The last date to trade
cum distribution will be Friday, 21 May 2004 and the units will trade ex-
distribution from the commencement of business on Monday, 24 May 2004. The
record date is Friday, 28 May 2004 and payment will be made to unitholders on
Monday, 31 May 2004. Unitholders may not dematerialise or rematerialise their
units between Monday, 24 May 2004 and Friday, 28 May 2004, both days inclusive.
By order of the Board
Sycom PROPERTY FUND MANAGERS LIMITED
(Registration number 1986/002756/06)
5 May 2004
Directors: TE Sewell* (Chairman) GA Nelson (MD) MS Aitken* FM Berkeley* JPD
Flanagan* CJV Fleming, LA Meyerowitz* MJ Watters* * Non-executive
Registered Office:
1st Floor, Building 2
Freestone Park
135 Patricia Road
Sandown 2146
POBox 4795, Rivonia, 2128
Sponsor:
Nedbank Capital Sponsor Unit
135 Rivonia Road
Sandton
2146
Auditors:
Deloitte & Touche
Deloitte & Touche Place
The Woodlands
Woodlands Drive
Woodmead, Sandton
Transfer Secretaries:
Computershare Limited
70 Marshall Street,
Johannesburg, 2001
POBox 61051
Marshalltown 2107
Date: 05/05/2004 05:51:09 PM Produced by the JSE SENS Department
