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SYC - Summarised audited group results and declaration of the final distribution for the year ended 31 March 2013
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
(Granted REIT status with the JSE Limited)
SUMMARISED AUDITED GROUP RESULTS AND DECLARATION OF THE FINAL DISTRIBUTION FOR THE YEAR ENDED 31 MARCH 2013
The directors of Sycom Property Fund Managers Limited, the management company of Sycom Property Fund, submit their report on
the audited results of Sycom for the year ended 31 March 2013.
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited at Audited at
31 Mar 2013 31 Mar 2012
(R'000) (R'000)
ASSETS
Property assets 8,378,608 6,114,228
Investment properties 8,120,486 5,948,577
Straight-line lease income accrual 258,122 165,651
Other non-current assets 310,722 236,852
Listed investment 310,722 236,756
Deferred taxation - 96
Current assets 298,019 953,384
Rental and other receivables 91,274 71,329
Cash and cash equivalents 206,745 882,055
Total assets 8,987,349 7,304,464
UNITHOLDERS' FUNDS AND LIABILITIES
Unitholders' funds 6,707,343 5,962,195
Unitholders' capital 2,579,048 2,579,048
Non-distributable reserves 4,128,295 3,383,147
Non-current liabilities 1,933,545 833,466
Borrowings 1,900,808 833,466
Derivative financial instruments 32,737 -
Current liabilities 346,461 508,803
Trade and other payables 111,409 259,604
Derivative financial instruments 9,820 36,366
Unitholders for distribution 225,232 212,833
Total equity and liabilities 8,987,349 7,304,464
Net asset value per unit - cents 2,698 2,398
Audited twelve Audited twelve
months to months to
31 Mar 2013 31 Mar 2012
(R'000) (R'000)
SUMMARISED CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
Revenue 651,352 544,157
Contractual rental revenue and recoveries 621,425 529,820
Straight lining of rental revenue adjustment 29,927 14,337
Direct property operating expenses (109,791) (97,009)
Net rental and related revenue 541,561 447,148
Investment income 15,961 13,781
Fair value changes on investment property and listed 721,507 335,919
investment
Fair value gain on investment properties 719,667 312,966
Fair value gain on listed investment 1 840 22,953
Administrative expenses (38,429) (30,412)
Service charge (37,178) (28,040)
Other administrative expenses (1,251) (2,372)
Profit before net finance costs 1,240,600 766,436
Net finance costs (60,227) (33,288)
Interest income 37,500 40,847
Interest expense (91,537) (68,981)
Net change in fair value of derivative financial instruments (6,190) (5,154)
at fair value through profit and loss
Profit before taxation 1,180,373 733,148
Taxation (96) 1,594
Profit and total comprehensive income for the year 1,180,277 734,742
Number of units in issue ('000) 248,604 248,604
Weighted number of units ('000) 248,604 220,256
Earnings per unit - cents 474.76 333.59
RECONCILIATION OF EARNINGS TO HEADLINE EARNINGS
AND DISTRIBUTABLE EARNINGS
Total comprehensive income 1,180,277 734,742
Unrealised surplus on revaluation of investment (719,571) (314,560)
properties, net of deferred tax
Headline Earnings 460,706 420,182
Straight-line rental income accrual (29,927) (14,337)
Unrealised deficit on derivative financial instruments 6,190 5,154
Unrealised surplus on revaluation of listed investment (1,840) (22,953)
Distributable earnings 435,129 388,046
Annual earnings per unit:
Basic earnings per unit - cents 474.76 333.59
Headline earnings per unit - cents 185.32 190.77
Annual distribution per unit - cents 175.03 166.66
Distribution per unit for the six months ended 30 81.05
September 2012: 84.43
Distribution per unit for the six months ended 31 March 85.61
2013: 90.60
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN UNITHOLDERS FUNDS
Non
distributable Retained
Capital reserve earnings Total
(R'000) (R'000) (R'000) (R'000)
Balance at 31 March 2011 1,863,856 3,036,451 - 4,900,307
Transactions with owners, recorded directly in
equity
Issue of 32 422 638 units on 16 February 2012 715,192 - - 715,192
Proceeds 745,721 - - 745,721
Prepaid distribution on issue (20,877) - - (20,877)
Capital issue costs (9,652) - - (9,652)
Total comprehensive income for the year - - 734,742 734,742
Transfer to non-distributable reserve - 346 696 (346,696) -
Unitholders' distribution - - (388,046) (388,046)
Balance at 31 March 2012 2,579,048 3,383,147 - 5,962,195
Transactions with owners, recorded directly in
equity - - - -
Total comprehensive income for the year - - 1,180,277 1,180,277
Transfer to non-distributable reserve - 745,148 (745 148) -
Unitholders' distribution - - (435 129) (435,129)
Balance at 31 March 2013 2,579,048 4,128,295 - 6,707,343
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
(R'000) (R'000)
Cash (utilised in)/ generated from operating activities
Cash generated from operations 296,620 586,580
Interest received 36,825 19,970
Interest paid (82,399) (73,891)
Dividend received 7,654 13,198
Distribution paid (422,730) (347,059)
Net cash (utilised in)/ generated from operating activities (164,030) 198,798
Cash flows utilised in investing activities
Additions to investment property (1,513,861) (214,336)
Subscription to Rights Issue (64,967) -
Net cash outflow from investing activities (1,578,828) (214,336)
Cash flows from financing activities
Proceeds on issue of new units, net of capital issue costs - 736,069
Borrowings raised 1,067,342 32,564
Net cash inflow from financing activities 1,067,342 768,633
Net (decrease)/ increase in cash and cash equivalents (675,516) 753,095
Cash and cash equivalents at the beginning of the year 882,055 129,134
Effect of exchange rate fluctuations on cash held 206 (174)
Cash and cash equivalents at the end of the year 206,745 882,055
BASIS OF PREPARATION AND AUDIT OPINION
The summary consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listings
Requirements for preliminary reports, and the requirements of the Collective Investment Schemes Act, 2002 applicable to
summary financial statements. The Listings Requirements require preliminary reports to be prepared in accordance with the
framework concepts and the measurement and recognition requirements of International Financial Reporting Standards,
the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued
by the Financial Reporting Standards Council, and to also, as a minimum, contain the information required by IAS 34 Interim
Financial Reporting. The accounting policies applied in the preparation of the consolidated financial statements, from which the
summary consolidated financial statements were derived, are in terms of International Financial Reporting Standards and are
consistent with the accounting policies applied in the preparation of the previous consolidated annual financial statements.
These audited summarised consolidated results have been prepared under the supervision of the group's financial director,
Baden Marlow (CA(SA)).
The summarised financial statements are prepared on the historical cost basis, except for investment properties, investment
properties held for sale, derivative financial instruments, and financial assets carried at fair value through profit or loss which
are measured at fair value.
The summarised financial statements are prepared on the going concern basis and Sycom's accounting policies have been
applied consistently to all periods presented.
KPMG Inc., the group's independent auditor, has audited the group annual financial statements for the year to 31 March 2013
and has expressed an unmodified opinion on the summarised consolidated financial statements. Their audit report is available
for inspection at the Funds registered office. The information contained in the commentary below does not form part of the audit opinion.
COMMENTARY
1. REVIEW OF RESULTS AND OPERATIONS
The board of Sycom Property Fund Managers Limited is pleased to report a distribution of 90.6 cents per unit (cpu) for
the six months ended 31 March 2013. This is 5.83% higher than the six month distribution to 31 March 2012. Together
with the interim distribution of 84.43 cpu, this gives unitholders an annual distribution of 175.03 cpu, an increase of
5.02% over the 2012 financial year.
Office market
The "A" grade office market continued to improve during the period under review, with the vacancy rate declining
from 5.1% at 31 March 2012 to 3.1% at the end of the current financial year. Leases were concluded on 43 271m2 of
GLA during the year, comprising 3,376m2 of new leases on previously vacant space, and 39 895m2 of leasing on space
that expired during the period. These leases terminated at an average net rental of R147.10/m2 and were renewed or
contracted at an average net rate of R129.25/m2, representing a 12.1% negative reversion. However, the achieved
rate of R129.25/m2 is 3.8% higher than the average rate of R124.54/m2 achieved in the 2012 financial year, a good
indication of rental growth returning to the 'A' grade office market. The leases at Advocates Chambers, most of which
were due to terminate on 30 June 2014, were prematurely renegotiated at a negative reversion of 22% from the
previously over-rented level of R165/m2 to market levels of R130/m2. Leases over 34 066 m2 terminate during the 2014
financial year at an average rate of R137.40/m2 and these are expected to be renewed at an average rate of
R133.80/m2, a negative reversion of 2.6%.
Construction of the R285m Roggebaai Square located on the Cape Town Foreshore (previously referred to at 167 on the
Square) is on track for completion in March 2014. Marketing of the 12,226m2 of offices is well under way and a number of
large, good quality enquiries are currently being pursued.
Retail
Against a backdrop of increasing household debt to disposable income levels, increasing inflation and declining
consumer expenditure, Sycom's South African retail portfolio has continued to yield positive results for the period
under review.
Vacancy levels remained constant over the year at just below 2% of leasable area with the centres witnessing an
increase in shopper volumes of 3% year on year.
During the year under review, leases totalling 28 509m2 terminated at an average rental of R161.64/m2 . Leases
totalling 29 739m2 were entered into at an average rental of R164.23/m2 , a positive increase of 1.6%. Excluding the
effects of a negative reversion of one major lease at Paarl Mall, the average retail rental increase would have been 5%.
New rentals at Vaal Mall and N1 City were entered into at an average increase of 10.5%. Expiries in the 2014 financial
year will amount to 21 644m2, terminating at an average rental of R225.50/m2and should be renewed at an average
rate of R237.70/m2 an increase of 5.4%. 86% of all existing retailers renewed expiring leases.
The retail portfolio attracted a reported R 6,5Bn in retail sales for the 12 month period reflecting a year on year growth
of 6,5%. The highest tenant turnover growths occurred at N1 City and Vaal Mall with year on year increases of 9,5%
and 8,8% respectively. Paarl Mall and Somerset Mall returned sound sales growth rates of 6.5% and 5.7%. Fourways
Crossing performed in line with many similar Lifestyle destination centres, with reported tenant turnovers remaining
flat.
Retail sales within the centres align with reported like for like trading density growths of the listed retailers. National
supermarket and apparel retail chains dominate Sycom's retail assets with only 8% of retail space let to independent
line shops.
Food services including take away outlets and family restaurants, health and beauty and homeware retailers reflected
the highest trading density growths of between 7,4% and 11% with a slower growth in trading densities' being
reported by the electronic and general discounters segments.
Against a total increase in retail turnovers of 6.5%, the total cost of occupation by retailers including rent, turnover
rent, operational cost, marketing, municipal and rates recoveries increased 8.4% year on year to 6.1% of their total
reported sales.
Vaal Mall
The 25,000m2 expansion of Vaal Mall has been driven by the strong demand from retailers for additional trading area.
Construction will commence, after formal building plan approval, in mid-January 2014. The expansion plan calls for a
16 month construction program which will ensure that disruption to existing mall operations over peak trading periods
is minimised. The expansion should be open for trading by Easter 2015. The total capital commitment is in the order of
R450m with an anticipated first year yield of 8,5%.
AECI-Pension Fund (AECI-PF) and Hyprop Investments Limited (Hyprop) transactions
On 28th March 2013 Sycom announced the terms of two transactions. The first was concluded with the AECI-PF for the
acquisition of AECI-PF's 50% undivided share in Somerset Mall. The second transaction was entered into with Hyprop
in respect of the sale by Sycom of the whole of Somerset Mall to Hyprop, in return for Hyprop surrendering
substantially all of its holding in Sycom to the Fund.
The board believes that facilitating the exit of Hyprop from Sycom in an orderly fashion brings a number of benefits to Sycom
unitholders, including:
- the removal of potential limitations and restrictions in Sycom's ability to operate in terms of the board's stated
strategy;
- the removal of the potential overhang of Sycom units which has arisen due to Hyprop stating that its holding of
Sycom units is a 'non-core' holding for Hyprop;
- an increase in the institutional free float in Sycom; and
- the removal of ongoing litigation, with its attendant costs and distraction of management and its potential impact
on the ability of the Fund to raise additional capital or enter into any transactions requiring unitholder approval.
A circular will be posted on Friday, 14 June 2013 convening a general meeting of Sycom unitholders for Tuesday, 16th July
2013, at which both transactions will be voted on by unitholders.
Rights offer
Sycom successfully completed a fully underwritten rights offer on 17th May 2013, raising R900 million. The funds raised are to
be used as part of the consideration for the AECI-PF transaction referred to above.
Ballot
A document was posted to unitholders on 24th May 2013, containing the terms of a ballot to amend Sycom's trust deed and
raise the gearing limit from 30% to 60%. The closing date of the ballot is Monday 8th July 2013.
The increased gearing limit will provide Sycom with greater flexibility in raising finance to take advantage of opportunities as
and when they arise. The board will continue to maintain the Fund's gearing within prudent limits and will consistently apply
its interest rate hedging policy,
The exit of Hyprop from the Sycom unitholder register and the more flexible gearing limits in Sycom will permit the board to
focus its energies on pursuance of its stated objectives, which are to provide sustainable real growth in distributions per
Sycom unit to unitholders and to maximise the total return on investment for unitholders over the long-term.
2. BORROWINGS
Sycom has an approved total facility of R2 153 million. Sycom's gearing level is presently 22.7%. After the Hyprop
transaction the gearing ratio is expected to be approximately 32%. Sycom had facilities of R2 153 million at year-end
and an additional facility of R600 million has been negotiated with RMB for the remainder of the funding on the AECI-
PF deal referred to above.
R'000 R'000
Termination date Interest rate Facility Balance Mar-13
Nedbank 25 Nov 2014 Prime - 2.5% 950 000 940 000
Nedbank 1 Dec 2016 Prime - 1.7% 701 995 459 383
Nedbank 20 Dec 2017 Prime - 1.8% 501 425 501 425
2 153 420 1 900 808
RMB 3 years after Somerset Jibar + 1.5% 600 000
Mall acquisition
3. STENHAM EUROPEAN SHOPPING CENTRE FUND ('SESCF')
SESCF, reflected as an investment, has concluded a four year loan facility of 170m terminating in 2016. After the
rights issue that took place in the period under review, Sycom's shareholding increased from 22.75% to 22.89%. The
performance of the underlying Nova Eventis shopping centre in Leipzig, Germany, remains steady.
4. LEASE EXPIRIES
The lease expiry profile by rental income shows normal levels of renewal activities over the next three years, with
approximately 50% of leases expiring beyond the three year period.
Lease expiry profile by revenue by sector
Total Retail Offices
vacancy 2.2% 0.7% 1.5%
Mar-14 16.6% 8.5% 8.1%
Mar-15 12.0% 6.6% 5.4%
Mar-16 20.0% 11.4% 8.6%
Mar-17 31.1% 8.6% 22.5%
Mar-18 9.7% 4.3% 5.4%
thereafter 8.4% 3.3% 5.1%
100.0% 43.4% 56.6%
5. VACANCIES AND BAD DEBTS
The table below provides details of Sycom's vacancies at March 2013, 2012 and 2011, expressed by rental income.
Mar-13 Mar-12 Mar-11
Retail vacancy 1.6% 2.4% 2.4%
Office vacancy 2.7% 3.9% 9.1%
Total vacancy 2.2 % 3.1% 5.7%
The impairment provision at 31 March 2013 amounted to R1.28 m compared to R1.24m at 31 March 2012. Bad debts
written off decreased to R1.25m in the current year from the R1.74m written off in the 2012 year. The bad debt and
tenant arrears positions have remained stable and the board does not expect any abnormal provisions or write offs to
become necessary as the economic climate continues to slowly improve.
6. UNITHOLDER SUMMARY
Sycom's major unitholders at 31 March 2013 are shown below, with a comparison to the prior year.
Major unitholders
31-Mar-2013 31-Mar-2012
Hyprop 33.9% 33.9%
Acucap 19.6% 17.2%
Stanlib 5.2% 5.2%
GEPF 4.8% 4.8%
Investec Asset Management 3.9% 5.9%
67.4% 67.0%
7. PROSPECTS
In terms of its strategy, Sycom continues to seek opportunities that will enhance shareholder value, including the
expansion of retail assets that are performing well and have further bulk rights, acquiring additional shares in co-
owned assets as opportunities arise, and by acquiring good quality office and retail properties that offer sound long-
term growth prospects. Underlying rental growth remains sound in the retail portfolio, and whilst office rentals are still
under pressure (with downward reversions on renewals dampening contractual rental growth), there are definite signs
of a firming in 'A' grade office rentals over the last 12 months. Accordingly, the board expects distribution growth for
the next financial year to be in the order of 6%. In the longer term, with normalised office vacancies and firming 'A'
grade rentals, and with gearing closer to 30%, growth in distributions can be expected to move into the 7 % to 8 %
range, in line with the potential of Sycom's high quality property portfolio.
The above information has not been reviewed or reported on by Sycom's auditors.
8. PAYMENT OF INTEREST
Notice is hereby given of the declaration of interest distribution number 56 in respect of the six months to 31 March
2013. The final distribution of 90.6 (ninety comma six) cents per unit has been approved in respect of the six month
period ended 31 March 2013. The last date to trade the units cum distribution is Friday, 28 June 2013 and the record
date will be Friday, 5 July 2013. The units will start trading ex-distribution from Monday, 1 July 2013. Distributions will
be made to unit holders on Monday 8 July 2013.
Unit certificates may not be dematerialised or rematerialised between Monday 1 July 2013 and Friday 5 July 2013 both
days inclusive.
On behalf of the board
G K EVERINGHAM PA THEODOSIOU
Chairman CEO
Sycom Property Fund Managers Ltd Sycom Property Fund Managers Ltd
13 June 2013
Registered Office
Suite A11 Westlake Square
Westlake Drive
Westlake
CAPE TOWN
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited
70 Marshall Street
JOHANNESBURG
http://www.sycom.co.za
Share Code: SYC
ISIN: ZAE000019303
Directors: GK Everingham (Chairman), MS Moloko (Deputy Chairman), FM Berkeley, JPD Flanagan,
BM Stocks, PA Theodosiou*# (CEO), CB Marlow*, GR Jones*
Company Secretary: H H-O Steyn
* Executive , # British
Date: 13/06/2013 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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