| Wed 3 Nov 2004, 17:03 | | RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 04 |
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SYCOM PROPERTY FUND - UNAUDITED GROUP RESULTS AND DECLARATION OF THE FIRST
INTERIM DISTRIBUTION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004
SYCOM PROPERTY FUND
JSE share code: SYC
ISIN: ZAE000019303
UNAUDITED GROUP RESULTS AND DECLARATION OF THE FIRST INTERIM DISTRIBUTION FOR
THE SIX MONTHS ENDED 30 SEPTEMBER 2004
The directors of Sycom Property Fund Managers Limited, 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 2004.
6 months 6 months
ended ended
30 Sep 2004 30 Sep 2003
INCOME STATEMENT (R`000) (R`000)
Revenue 117 981 130 815
Rental income 112 588 127 091
Interest received 5 393 3 724
Expenditure 40 779 44 375
Operating income 77 202 86 440
Deficit on disposal of
investment property (2 255) -
Fair value adjustment (note 2) 13 709 1 514
Earnings 88 656 87 954
EARNINGS AND DISTRIBUTIONS
Reconciliation of headline earnings to
distributable earnings
Headline earnings (operating income) 77 202 86 440
Deficit on disposal of investment property (2 255) -
Fair value adjustment (note 2) 13 709 1 514
Earnings 88 656 87 954
Net transfer from reserves 10 521 2 044
Transfer from non- distributable reserve 2 255 -
Transfer from distributable reserve (note 3) 8 266 2 044
Notional distribution prepayment received - 6 191
Distributable earnings 99 177 96 189
Un its in issue (`000) 183 356 183 356
Weighted average units in issue (`000) 183 356 171 327
Earnings per unit - cents
(weighted average units in issue) 48.35 51.34
Headline earnings per unit - cents
(weighted average units in issue) 42.10 50 .45
Distributable earnings per unit - cents
(weighted average units in issue) 54.09 56.14
Distributable earnings per unit - cents 54.09 52.46
Distributions
No. 37 of 52.46 cents per unit - 96 189
No. 39 of 54.09 cents per unit 99 177 -
99 177 96 189
As at As at
BALANCE SHEET 30 Sep 2004 31 Mar 2004
(R`000) (R`000)
Assets
Investment property at fair value 1 600 211 1 485 228
Current assets 69 823 204 675
Total assets 1 670 034 1 689 903
Unitholders` funds and liabilities
Capital and reserves 1 561 018 1 571 539
Current liabilities 109 016 118 364
Total unitholders` funds and liabilities 1 670 034 1 689 903
6 months 6 months
ended ended
STATEMENT OF CHANGES IN 30 Sep 2004 30 Sep 2003
CAPITAL AND RESERVES (R`000) (R`000)
Balance at beginning of the period 1 571 539 1 420 238
Units issued - 123 875
Net income 88 656 87 954
Notional distribution prepayment received - 6 191
Distributions (99 177) (96 189)
Balance at end of the period 1 561 018 1 542 069
6 months 6 months
ended ended
30 Sep 2004 30 Sep 2003
CASH FLOW STATEMENT (R`000) (R`000)
Cash generated by operations 85 518 84 228
Change in working capital (95) 2 300
Cash generated from operating activities 85 423 86 528
Net interest received 5 393 3 724
Distribution s (100 039) (44 316)
Capital gains taxation paid (5 301) -
Net cash (outflow)/inflow from
operating activities (14 524) 45 936
Units issued - 123 876
Disposal of investment property 44 200 -
Additions to investment property (161 438) (47 935)
Net cash (outflow)/inflow from investment
and financing activities (117 238) 75 941
Notional distribution prepayment received - 6 191
(Decrease)/increase in cash resources (131 762) 128 068
Cash resources at beginning of the period 177 171 40 700
Cash resources at end of the period 45 409 168 768
NOTES:
1. ACCOUNTING POLICIES
The unaudited results are prepared in accordance with Statement of Generally
Accepted Accounting Practice - Interim Financial Reporting AC127 and are
consistent with those accounting policies used in the prior period.
2. DEVELOPMENT PROPERTY
Properties under development have been revalued to reflect their fair value to
include capitalised interest received by the Fund but eliminated for Group
reporting purposes. Prior year figures have been restated accordingly.
3. MAINTENANCE RESERVE
Transfers from the maintenance reserve for the period amounted to Rm8,3 of
which Rm2,0 comprised reserves from sold properties. The restructuring of the
Fund whereby the properties are being transferred from the fixed property
companies to the Fund is almost complete. As a consequence of the imminent
transfer of the remaining few properties, the balance of the reserves of Rm6,3
have been written back.
4. PRIMARY OPERATIONAL SEGMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004
Retail Office Fund Total
(R`000) (R`000) (R`000) (R`000)
Rental income 50 590 61 998 - 112 588
Interest 283 309 4 801 5 393
Total revenue 50 873 62 307 4 801 117 981
Expenditure 15 308 20 264 5 207 40 779
Operating income 35 565 42 043 (406) 77 202
Fair value
adjustments 11 454
Earnings 88 656
Investment property
at fair value 608 578 991 633 - 1 600 211
Current assets 3 533 18 957 47 333 69 823
Current liabilities (872) (6 841) (101 303) (109 016)
Net assets 611 239 1 003 749 (53 970) 1 561 018
COMMENTS
1. RESULTS
Sycom`s distributable earnings for the six months ended 30 September 2004
amounted to 54.09 cents per unit. This represents growth of 3,1% over the
52.46 cents per unit for the corresponding period in 2003. While net property
income declined year - on- year, this was solely attributable to the
disposal of eleven properties towards the end of the previous financial
year. The proceeds from these sales have been reinvested in new property
developments, with interest on these funds capitalised to the cost of the
developments, compensating in part for the loss in property income. (see
note 3)
2. OPERATIONS
RETAIL - The Fund`s retail portfolio, which largely comprises investment in
four regional shopping centres and which accounts for 43% of net property
income continues to perform well, with rental income in aggregate exceeding
budget. On the back of sustained low inflation and interest rates a continuing
high level of consumer spending is reflected in tenant turnover and foot
traffic figures which show strong year-on - year growth across all of the
Fund`s retail properties. Vacancies within the retail portfolio remain
extremely low overall at 0,7%.
OFFICES - This now consists of ten A - grade, well - located properties with a
predominance of large corporate tenants. The general buoyancy of the economy
has started to reflect in improved demand for office space and while office
vacancy figures are generally recovering, this has not as yet translated into
improved rental levels. The Fund`s office properties have replicated this
trend with performance generally in line with budget and vacancies improving
from 9,8% to 8,4% over the past 6 months.
The Fund`s overall vacancy is presently 5,3% - down from 9,4% at September
2003 and 5,9% at March 2004.
3. DEVELOPMENTS
During the course of last year, the Fund embarked on a development programme
comprising the following projects at a combined cost of Rm567, which are all
due for completion over the next twelve months:
SHG Building - Cape Town Foreshore
Construction of this Rm163,7 flagship office building comprising 13 900m2 of
offices and 2 000m2 of ground floor retail was completed at the end of October
2004. The major tenant is Sonnenberg Hoffmann Galombik, who occupy 60% of the
office space on a ten- year lease. The building is expected to produce an
initial return of approximately 12,5%.
Discovery Building - Sandton CBD
This redevelopment project is due for completion in February 2005 at a cost of
approximately Rm120,0 and will provide 21 500m2 of office space. Discovery
Health have entered into a seven - year lease over the entire premises 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, which was completed at the end of
October 2004 is 100% let. The anticipated final cost of Rm160,5, includes a
provision of Rm12,1 for upgrading of the existing malls which will commence in
January 2005. The projected return on total capital expenditure in the first
year is 12,5%. This additional space increases the total rentable area to 69
500m2, thereby ensuring the Mall`s regional dominance.
Paarl Mall - Paarl (70% undivided share)
Construction of this new 35 500m2 regional shopping centre located adjacent to
the N1 motorway in Paarl has commenced and is anticipated to be complete by
mid- October 2005. Leasing offers for 85% of the area have been received with
the leasing launch for the balance of the line shops scheduled for November
2004. The estimated cost is Rm290 and the development is expected to show a
12,0% initial return.
4. ACQUISITIONS
Vaal Mall - The Fund has agreed heads of terms for the acquisition of a 51%
undivided share in a new regional shoppi ng centre to be developed in the Vaal
Triangle. This 44 000m2 centre will be located in Vanderbijlpark at the
intersection of the major arterials of the R42 Barrage Road, The Golden
Highway and Rossini Boulevard. Construction is expected to commence in
November 2004 with completion by April 2006. The primary trade area consists
of Vanderbijlpark, Sasolburg and the Western fringe of Vereeniging. The
secondary trade area encompasses, inter alia, the rest of Vereeniging,
Deneysville, Kroonstad and Parys. Demographic surveys indicate pent- up demand
for between 40 000m2 and 45 000m2 of retail space to service this area.
Leasing commitments are at this stage in excess of 70% and the proportion of
national tenants in the final tenant mix is expected to be approxima tely 85%.
The total cost of the development is estimated at Rm400,0 and an initial yield
of 11,0% has been guaranteed by the developers. Given the Fund`s current
forward yield and/or cost of debt, this acquisition will be earnings
enhancing. This investment is in line with the Fund`s strategy of growing its
retail exposure by focusing on large, dominant regional shopping centres.
5. FUNDING
At 30 September 2004 the Fund`s capital borrowings amounted to Rm29,4.
Outstanding development commitments and sundry capital expenditure amount to
Rm287,3. This results in a funding requirement of Rm316,7, which is well
within the Rm400,0 loan facility currently in place. Including the potential
commitment of approximately Rm200 for the acquisition of the Vaal Mall, debt
funding will increase to approximately Rm517, compared to the Fund`s
anticipated maximum borrowing capacity of around Rm800 on completion of the
developments.
6. LIQUIDITY
Over the past year, 38% of the Fund`s units in issue were traded. This
compares well to the listed property sector and overall JSE Securities
Exchange South Africa (`JSE`) liquidities of 32% and 37% respectively over the
same period.
7. PROSPECTS
The robust performance of retail property looks set to continue for the
foreseeable future. With current vacancies of 0,7% and a low lease expiry
profile of 9,6% by area over the next twelve months, the Fund is well
positioned to benefit from this performance. Of particular importance is the
income that will be generated from the newly complet ed Somerset Mall
extensions. The upturn in the office letting market should see further
recovery in the performance of this sector during the next year. With the
Fund`s office vacancy currently at 8,4% and a low lease expiry profile of
12,8% over the next year, further improvement in the performance of the office
portfolio is expected. Overall, improved growth in distributions for the year
to 31 March 2005 compared with that of the previous year is expected.
8. TRADING STATEMENTS
In terms of paragraph 3.4 (b)(v) of the Listing Requirements of the JSE, Sycom
in agreement with the JSE has adopted distributable earnings per unit as a
proxy for cash flow per unit as the financial results measurement for trading
statement purposes. It is effective for the financial year ending 31 March
2005.
9. DISTRIBUTION DECLARATION
Notice is hereby given of the declaration of distribution No. 39 in respect of
the six months to 30 September 2004 of 54.09 cents per unit. The last date to
trade cum distribution will be Friday, 19 November 2004 and the units will
trade ex - distribution from the commencement of business on Monday, 22
November 2004. The record date is Friday, 26 November 2004 and payment will be
made to unitholders on Monday, 29 November 2004. Unitholders may not
dematerialise or rematerialise their units between Monday, 22 November 2004 and
Friday, 26 November 2004, both days inclusive.
By order of the Board
Sycom PROPERTY FUND MANAGERS LIMITED
(Registration number 1986/002756/06)
(Incorporated in the Republic of South Africa)
Directors: T E Sewell* (Chairman), G A Nelson (MD), M S Aitken*,
F M Berkeley*, J P D Flanagan*, C J V Fleming, L A Meyerowitz*, W C Ross*,
M J Watters* *Non- executive
Registered Office:
1st Floor, Building 2
Freestone Park
135 Patricia Road
Sandown, 2146
P O Box 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 Investor Services 2004 (Pty) Ltd
70 Marshall Street
Johannesburg, 2001
P O Box 61051
Marshalltown, 2107
3 November 2004
Date: 03/11/2004 05:00:33 PM
Produced by the JSE SENS Department
