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SYC
SYC
Sycom - Reviewed group results and declaration of the final distribution for the
year ended 31 March 2006
Sycom Property Fund
JSE share code: SYC
ISIN No: ZAE000019303
REVIEWED GROUP RESULTS AND DECLARATION OF THE FINAL DISTRIBUTION FOR THE YEAR
ENDED 31 MARCH 2006
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 2006.
INCOME STATEMENT
Reviewed Restated
12 months 12 months
ended ended
31 Mar 06 31 Mar 05
(R"000) (R"000)
Revenue 340 013 264 576
Rental income 310 547 244 549
Straight-line rental adjustment 23 880 12 477
Interest received 5 586 7 550
Expenditure 102 468 83 118
Administration expenses 17 904 11 983
Interest paid 7 159 -
Property expenses 77 405 71 135
Operating income 237 545 181 458
Fair value adjustments 361 165 429 653
Realised deficit on disposal of (703) (1 589)
investment in fixed property companies
Realised (deficit)/surplus on disposal of (656) 8 071
investment property
Unrealised surplus on revaluation of 386 404 435 648
investment property
Straight-line rental adjustment (23 880) (12 477)
Earnings 598 710 611 111
EARNINGS AND DISTRIBUTIONS
Reconciliation of headline earnings to
distributable earnings
Headline earnings (operating income) 237 545 181 458
Fair value adjustment 361 165 429 653
Earnings 598 710 611 111
Net transfer to reserves (385 045) (407 714)
Transfer to non-distributable reserve (385 045) (415 980)
Transfer from distributable reserve - 8 266
Distributable earnings 213 665 203 397
Units in issue (`000) 183 356 183 356
Earnings per unit - cents 326.53 333.29
Headline earnings per unit - cents 129.55 102.26
Distributable earnings per unit - cents 116.53 110.93
Distributions
No. 39 of 54.09 cents per unit - 99 177
No. 40 of 56.84 cents per unit - 104 220
No. 41 of 54.97 cents per unit 100 791 -
No. 42 of 61.56 cents per unit 112 874 -
213 665 203 397
BALANCE SHEET
As at Restated
As at
31 Mar 06 31 Mar 05
(R"000) (R"000)
Assets
Property portfolio 2 982 689 2 189 495
Investment property 2 588 955 1 766 008
Development property 261 348 314 981
Straight-line rental adjustment 132 386 108 506
Current assets 112 654 119 430
Total assets 3 095 343 2 308 925
Unitholders" funds and liabilities
Capital and reserves 2 364 298 1 979 253
Interest bearing liability 541 501 178 175
Current liabilities 189 544 151 497
Total unitholders" funds and liabilities 3 095 343 2 308 925
Net asset value per unit (cents per unit) 1 289 1 079
STATEMENT OF CHANGE IN 12 months 12 months
CAPITAL AND RESERVES ended ended
31 Mar 06 31 Mar 05
(R"000) (R"000)
Balance at beginning of the year 1 979 253 1 571 539
Earnings 598 710 611 111
Distributions (213 665) (203 397)
Balance at end of the year 2 364 298 1 979 253
CASH FLOW STATEMENT
12 months 12 months
ended ended
31 Mar 06 31 Mar 05
(R"000) (R"000)
Cash generated by operations 235 967 161 431
Change in working capital 13 402 (5 516)
Cash generated from operating activities 249 369 155 915
Net interest paid (23 661) 7 550
Distributions (205 011) (199 216)
Capital gains taxation paid - (5 541)
Net cash inflow/(outflow) from operating 20 697 (41 292)
activities
Disposal of property - 68 604
Additions to property (336 541) (345 992)
Net cash outflow from investment (336 541) (277 388)
activities
Increase in borrowings 363 326 178 175
Net cash inflow from financing activities 363 326 178 175
Net increase/(decrease) in cash resources 47 482 (140 505)
Cash resources at beginning of the year 36 666 177 171
Cash resources at end of the year 84 148 36 666
NOTES
1. ACCOUNTING POLICIES
The reviewed abridged financial report has been prepared in accordance with
International Financial Reporting Standards ("IFRS") (IAS 34), the requirements
of the Companies Act (Act 61 of 1973) and the requirements of the Collective
Investment Schemes Control Act of 2002. IFRS 1 - First time adoption of
International Financial Reporting Standards has been applied in the preparation
of the financial results. No adjustments have arisen from the conversion to IFRS
affecting the financial position, financial performance and cash flows of the
Fund. The accounting policies are consistent with those applied in the prior
year except for the following changes adopted from 1 April 2005:
(a) IAS 17: Leases, to give effect to the straight-lining of lease rentals. This
has no effect on the distributable earnings.
(b) In terms of IAS 40: Investment property, the straight-line adjustment and
resulting cumulative figure are deducted from the net revaluation of investment
property in the income statement and balance sheet respectively.
(c) Tenant procurement costs are written-off over the period of the applicable
leases. In the current year expenditure totalling Rm6,5 has been deferred.
2. COMPARATIVE FIGURES
The comparative figures have been restated in order to give effect to the
adoption of IAS 17: Leases in respect of the straight-lining of lease rentals.
3. PRIMARY OPERATIONAL SEGMENTS FOR THE YEAR ENDED 31 MARCH 2006
Retail Office Fund Total
(R"000) (R"000) (R"000) (R"000)
Rental income 140 722 169 825 - 310 547
Straight-line 9 417 14 463 - 23 880
rental
adjustment
Interest 592 534 4 460 5 586
Total revenue 150 731 184 822 4 460 340 013
Expenditure 37 193 40 212 25 063 102 468
Operating 113 538 144 610 (20 603) 237 545
income
Fair value 361 165
adjustments
Earnings 598 710
Property 1 612 740 1 369 949 - 2 982 689
portfolio
Investment 1 332 383 1 256 572 - 2 588 955
property
Property under 232 260 29 088 - 261 348
development
Straight-line 48 097 84 289 - 132 386
rental
adjustment
Current assets 2 940 20 688 89 026 112 654
Loan - - (541 501) (541 501)
Current (55 995) (5 440) (128 109) (189 544)
liabilities
Net assets 1 559 685 1 385 197 (580 584) 2 364 298
COMMENTS
1. Results
Sycom"s distributable earnings for the financial year ended 31 March 2006
amounted to 116,53 cents per unit. This represents growth of 5,1% over the
110,93 cents per unit distribution for the year ended 31 March 2005 and is in
line with the Fund"s forecast.
The property portfolio was again independently valued at year-end resulting in a
revaluation surplus of Rm386,4 with the value of the Fund"s properties being set
at Rbn2,98. The resultant net asset value totalled 1 289 cents per unit,
representing an increase of 19,5% from 1 079 cents per unit at 31 March 2005.
The increase is attributable to the value of physical properties reacting to
market demand and the general lowering of capitalisation rates.
Earnings for the year have recognised the effect of straight-lining lease
rentals as required by IAS 17. Sycom will continue to distribute income based on
contractual income from leases in accordance with its Trust Deed and the
Collective Investments Schemes Control Act. To avoid overstatement of investment
property, this straight-line lease adjustment has been taken into account in the
net revaluation of investment property. The recognition of future rentals in
this manner and the magnitude of this amount (Rm132,4), reflects the quality of
the contractual leases, which are significant in number, value, and duration.
2. Operations
Overall vacancies at 31 March 2006 were 1,0%, down from 4,8% at 31 March 2005.
Retail
On the back of a buoyant consumer market, the Fund"s retail portfolio which
predominantly comprises investment in five regional shopping centres accounting
for 45% of net property income has experienced good performance, with rental
income in aggregate exceeding budget. Vacancies in the retail portfolio remain
low at 0,8%.
Offices
Sycom"s office portfolio comprises ten A-grade, well-located properties with a
predominance of large corporate tenants. The office market continues to recover
with increasing demand for office space resulting in improved occupancy levels
and growth in rentals. Other than an initial unexpected vacancy in the SHG
building on completion of this development, office portfolio has performed in
line with expectations.
With the improvement in the office letting market, the Fund"s office portfolio
vacancy has further reduced from 6,9% at March 2005 to a current level of 1,2%.
3. Developments
During the year Sycom continued with its development programme comprising the
following projects:
Paarl Mall (70% undivided share)
This 36 500m2 regional retail centre in which the Fund has a 70% interest was
completed on time at a total cost of Rm320 and is expected to show an initial
yield of 11,9%. The Centre was successfully launched and opened for trading,
fully let, on the 20th October 2005 and has since experienced robust growth in
both foot traffic and turnover.
Vaal Mall (71% undivided share)
This 48 800m2 centre opened for trade on 27th April 2006, fully let. Early
trading indications are extremely positive with exceptional footfall of 47 000
and tenants turnover ahead of expectations. Total cost is estimated at Rm400
with an initial yield of 11%.
N1 City extension (42% undivided share)
The total cost of this project is anticipated to be around Rm118 with an initial
yield of 10.0%. The project is due for completion in June 2006 and includes the
construction of an additional 8 500m2 of rentable space, 250 additional parking
bays and the refurbishment of the existing mall.
Harrowdene Phase 6
This comprises two buildings totalling 6 345m2 at an estimated cost of Rm50,4.
The buildings have been fully let to a single tenant on a 5 year lease.
Completion is due in September 2006 and the anticipated initial yield is around
12%. This effectively brings to an end the construction of Harrowdene Office
Park which has been developed by the Fund on a phased basis over the past 12
years and now comprises 36 750m2 of office space.
4. Property Disposals
An agreement has been concluded for the sale of the Hewlett Packard Building
(Rivonia) for Rm56,8 net. This represents an exit yield of 8,8% and a surplus
over book value of Rm3,8.
In terms of the acquisition agreement for Vaal Mall, a 20% share in the
ownership was under option to a local BEE consortium. This option has been
exercised, as previously reported, and results in Sycom"s share in the ownership
reducing from 71% to 51%. The proceeds from this disposal will be determined on
a cost recovery basis.
5. Funding
At 31 March 2006 borrowings amounted to Rm541,50. Outstanding development and
sundry capital expenditure commitments total Rm167,44. Outstanding net proceeds
from the sale of properties amount to Rm114,41, which will result in a projected
funding requirement of Rm594,52 by September 2006. On completion of the
developments this will represent gearing of around 20% of the value of the
Fund"s assets, well within the Funds maximum borrowing capacity which will be
approximately Rm920.
6. Liquidity
Of the Fund"s units in issue 63% were traded over the past year. This compares
favourably with the listed property sector and overall JSE Securities Exchange
South Africa ("JSE") liquidities of 49% and 48% respectively over the same
period.
7. Prospects
The robust performance of retail property continues with current vacancies of
0,8% and a low lease expiry profile of 9% of rentable retail area over the next
twelve months.
The upturn in demand for office space should see further recovery in this sector
and should impact positively on new leases and renewals for the Fund which has
an office expiry profile of 14% of rentable area over the next twelve months.
It is expected that growth in distributable earnings for the year to 31 March
2007 will exceed that for the prior year.
Completion of the abovementioned projects marks the culmination of a robust
development and refurbishment programme commenced 5 years ago. Currently a
number of new development prospects are being pursued.
8. Change in Control of Management Company
Sycom Property Fund Managers Limited (SPFM) is the manager of Sycom in terms of
the Collective Investment Schemes Control Act, 2002. On 17 May 2006, unitholders
of Sycom were advised that Grapnel Property Group (Pty) Ltd, the ultimate
shareholder of SPFM has disposed of its interests in SPFM to Parkdev
(Proprietary) Limited ("Parkdev"), subject to certain conditions precedent,
including the approval of the Registrar of Collective Investment Schemes.
Parkdev is the asset management company for Attfund Limited, a public unlisted
property fund. Attfund has, together with the recent purchase of the Cape Gate
retail precinct, over 6 billion rands worth of property assets, which assets are
very similar to those of Sycom. Other assets of Attfund include Clearwater Mall,
Woodlands Boulevard, Garden Route Mall, Atterbury Value Mart, plus a 25%
interest in Centurion Mall as well as a number of office parks located in
Pretoria and the Cape. Moreover, Attfund holds approximately 23% of the Sycom
units in issue. The transaction should be positive for Sycom in that it will
align the interests of the manager of Sycom with those of the Sycom unitholders.
There will be no change in the current strategic thrust of Sycom, which will
continue to develop and expand its existing portfolio.
The directors of SPFM do not believe that the transaction should have any effect
on the headline or distributable earnings or net asset value of Sycom units.
A further announcement will be made in due course as soon as this transaction
becomes unconditional.
9. Trading Statements
In terms of Section 3, 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 the financial results measurement for trading statement purposes.
10. Distribution Declaration
Notice is hereby given of the declaration of distribution No.42 in respect of
the six months to 31 March 2006 of 61,56 cents per unit. The last date to trade
cum distribution will be Friday,
2 June 2006 and the units will trade ex-distribution from the commencement of
business on Monday, 5 June 2006. The record date is Friday, 9 June 2006 and
payment will be made to unitholders on Monday 12, June 2006. Unitholders may not
dematerialise or rematerialise their units between Monday, 5 June 2006 and
Friday, 9 June 2006, both days inclusive.
11. Audit Report
The financial information has been reviewed by the Company"s auditors and a copy
of their report is available for inspection at the Company"s registered office.
By order of the Board
SYCOM PROPERTY FUND MANAGERS LIMITED
(Registration number 1986/002756/06)
Directors of Sycom Property Fund Managers Limited: 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, 2146
P O 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
19 May 2006
Date: 18/05/2006 10:54:24 AM Produced by the JSE SENS Department
