| Tue 17 May 2005, 17:01 | | Sycom - Reviewed group results and declaration o |
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Sycom - Reviewed group results and declaration of a final distribution for the
year ended 31 March 2005
SYCOM PROPERTY FUND
(`Sycom` or `the Fund`)
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
REVIEWED GROUP RESULTS AND DECLARATION OF A FINAL DISTRIBUTION FOR THE YEAR
ENDED 31 MARCH 2005
The directors of Sycom Property Fund Managers Limited, the management company
of Sycom Property Fund (Sycom) or (the Fund), submit their report on the
reviewed results of Sycom for the year ended 31 March 2005
INCOME STATEMENT 12 months 12 months
ended ended
31 Mar 2005 31 Mar 2004
Reviewed Audited
(R`000) (R`000)
Revenue 252 099 262 505
Rental income 244 549 252 047
Interest received 7 550 10 458
Expenditure 83 118 87 426
Operating income 168 981 175 079
Fair value adjustments 442 130 43 457
Realised deficit
on disposal of investment
in fixed property companies (1 589) (270)
Realised surplus/(deficit)
on disposal of
investment property 8 071 (12 671)
Unrealised surplus on
revaluation of
investment property 435 648 56 398
Net income before taxation 611 111 218 536
Taxation (Deferred
Capital Gains Tax and STC) - (1 075)
Earnings 611 111 217 461
EARNINGS AND DISTRIBUTIONS
Reconciliation of headline earnings
to distributable earnings
Headline earnings (operating income) 168 981 174 004
Fair value adjustment 442 130 43 457
Earnings 611 111 217 461
Net transfer to reserves (407 714) (27 424)
Transfer to
non-distributable reserve (415 980) (34 362)
Transfer from
distributable reserve 8 266 6 938
Notional distribution
prepayment received - 6 191
Distributable earnings 203 397 196 228
Units in issue (`000) 183 356 183 356
Weighted average
units in issue (`000) 183 356 177 342
Earnings per unit -
cents (weighted average
units in issue) 333.29 122.62
Headline earnings per unit - cents
(weighted average units in issue) 92.16 98.12
Distributable
earnings per unit - cents
(weighted average units in issue) 110.93 110.65
Distributable
earnings per unit - cents 110.93 107.02
Distributions
No. 37 of 52.46 cents per unit - 96 189
No. 38 of 54.56 cents per unit - 100 039
No. 39 of 54.09 cents per unit 99 177 -
No. 40 of 56.84 cents per unit 104 220 -
203 397 196 228
BALANCE SHEET
As at As at
31 Mar 2005 31 Mar 2004
Reviewed Audited
(R`000) (R`000)
Assets
Property portfolio 2 189 495 1 485 228
Investment property 1 874 514 1 321 166
Development property 314 981 164 062
Current assets 119 430 204 675
Total assets 2 308 925 1 689 903
Unitholders` funds and liabilities
Capital and reserves 1 979 253 1 571 539
Interest bearing liabilities 178 175 -
Current liabilities 151 497 118 364
Total unitholders`
funds and liabilities 2 308 925 1 689 903
Net asset value
per unit (cents per unit) 1 079 857
STATEMENT OF CHANGES IN
CAPITAL AND RESERVES 12 months 12 months
ended ended
31 Mar 2005 31 Mar 2004
Reviewed Audited
(R`000) (R`000)
Balance at beginning of the year 1 571 539 1 420 239
Units issued - 123 876
Earnings 611 111 217 461
Notional distribution
prepayment received - 6 191
Distributions (203 397) (196 228)
Balance at end of the year 1 979 253 1 571 539
CASH FLOW STATEMENT 12 months 12 months
ended ended
31 Mar 2005 31 Mar 2004
Reviewed Audited
(R`000) (R`000)
Cash generated by operations 161 431 172 639
Change in working capital (5 516) (10 139)
Cash generated from
operating activities 155 915 162 500
Net interest received 7 550 10 458
Distributions (199 216) (140 505)
Capital gains taxation paid (5 541) (515)
Net cash (outflow)/inflow
from operating activities (41 292) 31 938
Disposal of property 68 604 111 450
Additions to property (345 992) (136 984)
Net cash outflow from
investment activities (277 388) (25 534)
Units issued - 123 876
Increase in borrowings 178 175 -
Net cash inflow from
financing activities 178 175 123 876
Notional distribution
prepayment received - 6 191
Net (decrease)/increase
in cash resources (140 505) 136 471
Cash resources at
beginning of the year 177 171 40 700
Cash resources at
end of the year 36 666 177 171
Notes
1.ACCOUNTING POLICIES
The year-end results are prepared in accordance with Statements of Generally
Accepted Accounting Practice applicable to AC127 `Interim Financial Reporting`
and are consistent with those accounting policies used in the prior year. 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.PRIMARY OPERATIONAL SEGMENTS FOR THE YEAR ENDED 31 MARCH 2005
Retail Office Fund Total
(R`000) (R`000) (R`000) (R`000)
Rental income 107 801 136 748 - 244 549
Interest 717 553 6 280 7 550
Total revenue 108 518 137 301 6 280 252 099
Expenditure 31 240 39 895 11 983 83 118
Operating income 77 278 97 406 ( 5 703) 168 981
Fair value
adjustments 442 130
Earnings 611 111
Property
portfolio 1 097 928 1 091 567 - 2 189 495
Investment
property 966 788 907 726 - 1 874 514
Development
property 131 140 183 841 - 314 981
Current assets 12 746 70 287 36 397 119 430
Loan - - ((178 175) (178 175)
Current
liabilities (23 193) (20 856) ((107 448) (151 497)
Net assets 1 087 481 1 140 998 ( (249 226) 1 979 253
COMMENTS
1.Results
Sycom`s distributable earnings for the financial year ended 31 March
2005 amounted to 110,93 cents per unit. This represents growth of 3,7% over
the 107,02 cents per unit distribution for the year ended 31 March 2004.
Net asset value at 31 March 2005 totalled 1 079 cents per unit,
representing an increase of 25,9% from 857 cents per unit at 31 March 2004.
The increase is attributable to the value of physical properties reacting to
market demand and the general lowering of capitalisation rates. The property
portfolio was independently valued at Rbn2,19 at 31 March 2005.
Sycom`s overall returns are in line with its forecast. The strong
earnings growth reflected in the core portfolio was somewhat offset by the
newly-developed SHG Building in Cape Town not yet fully let and a
construction delay in the completion of the Discovery Building.
Net property income declined year-on-year due to the disposal of certain
non-core properties most notably those made at the end of the previous year
and further disposals during the current 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.
Transfers from major maintenance reserves for the year in respect of
amounts released as a consequence of properties sold totalled Rm2,02. In line
with the industry standards, the balance of the reserve of Rm8,27 has been
distributed.
2.Operations
Retail
Sycom`s retail portfolio, which predominantly comprises investment in
four regional shopping centres accounting for 44% of net property income, has
experienced good performance, with rental income in aggregate exceeding
budget. Low inflation and a marginal lowering of interest rates together with
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 in the retail portfolio show a further
improvement dropping to a level of 0,5% at 31 March 2005, from 1,0% at 31
March 2004.
Offices
The portfolio consists of ten A-grade, well-located properties with a
predominance of large corporate tenants. The improved demand for office space
continues with vacancy figures dropping and signs of rental growth on renewals
and new leases flowing through. This is reflected in Sycom`s standing office
portfolio which has performed in line with budget. Vacancies (excluding the
SHG Building) improved substantially from 9,1% at 31 March 2004 to 4,3% at 31
March 2005.
Overall the Fund`s total vacancy at 31 March 2005 was 5,2%, a marginal
improvement on the 5,9% at 31 March 2004.
3. Developments
During the year Sycom continued with its development programme
comprising the following projects:
SHG Building - Cape Town Foreshore
This Rm163,6 flagship office building, comprising 15 200m2 of offices
and 2 600m2 of ground floor retail, came on stream in early December 2004. The
major tenant is Sonnenberg Hoffmann Galombik, on a 10-year lease.
Discovery Building - Sandton CBD
This Rm135 redevelopment project was completed at 31 March 2005 and the
21 500m2 of office space is fully occupied by Discovery on a seven-year lease.
The initial return on this redevelopment is expected to be around 10,0%.
Somerset Mall Phase 3 - Somerset West (50% undivided share)
The 14 400m2 extension was completed at the end of October 2004, fully
let, at a total cost of Rm132,4. The upgrading of existing malls at a cost of
Rm29,6, commenced in January 2005 and it is anticipated that the project will
be completed in July 2005. The projected return on the total capital
expenditure in the first year is approximately 12,5%.
Paarl Mall - Paarl (70% undivided share)
Construction of this new 36 500m2 regional shopping centre is
progressing on schedule for completion in mid-October 2005. 84% of the leases
(by rentable area) have been concluded and the Rm324 centre is expected to be
fully let at opening. The projected initial yield remains around 12,0%.
Vaal Mall - Vanderbijlpark (71% undivided share)
The agreement for the acquisition of this 44 300m2 regional shopping
centre has been concluded. The Fund has acquired a 71% undivided share of the
Rm410 shopping centre, of which 20% is under option to a local BEE consortium
on condition that this option is exercised before the mall`s completion,
scheduled for April 2006. Committed leases total 77% of GLA with the balance
under negotiation. An initial yield of 11% has been guaranteed by developers.
N1 City Mall - Cape Town (42% undivided share)
Work has begun on the Rm111 refurbishment of and extension to the N1
City Mall. The project includes the refurbishment of the existing mall, the
construction of an additional 8 500m2 retail space and 250 additional parking
bays. The project is expected to be completed by March 2006 and generate an
initial return of 10,0%.
4. Property Disposals
Sycom disposed of two non-core properties during the year for a total
consideration of Rm55,15. Noland House in Mowbray was sold for Rm24,25 and
Hurlingham Office Park in Sandton for Rm30,9. These sales represent an
aggregate exit yield of approximately 12,3% and a surplus over book value of
Rm8,45. The proceeds of these sales have been allocated to new developments.
5. Funding
At 31 March 2005 borrowings amount to Rm215,11. Outstanding development
and sundry capital expenditure commitments total Rm464,2. Outstanding net
proceeds from the sale of properties amount to Rm36,21, equating to a funding
requirement of Rm643,1 by March 2006. This will fall within the Funds maximum
borrowing capacity which will be around Rm807 on completion of the
developments. This will represent gearing of 24% of the value of the Fund`s
assets. Sycom has strategically increased its debt level to take advantage of
lower interest rates.
6. Liquidity
Of the Fund`s units in issue 57% were traded over the past year. This is
significantly higher than 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 continues with current
vacancies of 0,5% and a low lease expiry profile of 17% of rentable retail
area over the next twelve months.
The upturn in demand for office space should see further recovery in
this sector and Sycom`s office vacancy of 8,7%, and low lease expiry profile
of 8,6% of rentable office area indicate that the performance of this
portfolio should, over the next year, experience further improvement.
During this financial year additional growth in earnings will be
achieved as new developments roll out. Income from the Discovery Building
commenced in April 2005 and Paarl Mall will produce income from mid-October
2005. Of particular importance is the growth in rental income when escalations
are effected after the first twelve months of occupation in a new development.
As the development pipeline rolls out, Sycom is ideally positioned to achieve
robust growth into the future.
Growth in earnings for the year to 31 March 2006 is expected to be
approximately 5,0%. This forecast has not been reviewed by the Auditors.
International Financial Reporting Standards have been adopted with
effect from 1 April 2005.
8. Directorate
Mr JM Ngobeni an independent non-executive director was appointed on 15
December 2004. MS Aitken a non-executive director resigned on 9 February 2005.
9. Trading Statements
In terms of paragraph 3.4 (b)(v) of the Listings 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 was effective for the financial year ended
31 March 2005.
10. Distribution Declaration
Notice is hereby given of the declaration of distribution No. 40 in
respect of the six months to 31 March 2005 of 56,84 cents per unit. The last
date to trade cum distribution will be Friday, 3 June 2005 and the units will
trade ex-distribution from the commencement of business on Monday, 6 June
2005. The record date is Friday, 10 June 2005 and payment will be made to
unitholders on Monday 13, June 2005. Unitholders may not dematerialise or
rematerialise their units between Monday, 6 June 2005 and Friday, 10 June
2005, 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), F M Berkeley*, J P D
Flanagan*, C J V Fleming, L A Meyerowitz*,
J M Ngobeni*, W C Ross* *Non-executive
Registered Office:
1st Floor, Building 2
Freestone Park
135 Patricia Road
Sandown, Sandton,
2196
PO Box 4795,
Rivonia, 2128
Sponsor:
Nedbank Capital
Sponsor Unit
135 Rivonia Road
Sandton
2196
Auditors:
Deloitte & Touche
Deloitte & Touche Place
The Woodlands
Woodlands Drive
Woodmead, Sandton, 2196
Transfer Secretaries:
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street
Johannesburg, 2001
PO Box 61051
Marshalltown, 2107
17 May 2005
