Wrap Text
Summarised audited financial statements for the year ended 30 June 2013
Synergy Income Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2007/032604/06)
JSE share code for A linked units "SGA" ISIN ZAE000161550
JSE share code for B linked units "SGB" ISIN ZAE000162293
(Approved as a REIT by the JSE)
("Synergy" or "the Fund")
Managed by
Capital Land Asset Management Proprietary Limited
SUMMARISED AUDITED FINANCIAL STATEMENTS
for the year ended 30 June 2013
Highlights Year on year
- Distributions to A linked unitholders of 82.66 cents per unit 5%
- Distributions to B linked unitholders of 51.38 cents per unit 78%
- NAV per combined linked unit of R8.15 at 30 June 2013 15%
- Investment property valued at R1.877 billion 60%
- Market capitalisation of R1.261 billion R628 million
- Reduction in retail vacancies from 4.6% to 3.3% 1.3% improvement
- Increase in national tenant ratio from 81% to 86% 5% improvement
COMMENTARY
Profile
Synergy Income Fund Limited ("Synergy" or "the Fund") is a
specialised retail property fund with a specific focus on medium-
sized community and small regional shopping centres located
in high-growth nodes. Synergy has an investment bias towards
commuter-oriented centres located in township areas and rural
towns.
Synergy's property portfolio at 30 June 2013 consisted of
14 properties with a total market value of R1.877 billion. An
agreement to acquire Atlantis City Shopping Centre ("Atlantis"),
with effect from 1 September 2013, was concluded during
the year. This acquisition will increase the market value of total
property assets in the Synergy portfolio to R2.231 billion.
Listing on the JSE, unit structure, unit placement and
REIT status
Synergy listed on the Main Board of the Johannesburg Stock
Exchange ("JSE") on 14 December 2011.
Synergy has separately listed A and B linked units, each offering
investors a different risk and reward profile. The A linked units
have a preferential entitlement to distributions that escalate at
5% annually until 30 June 2017 and thereafter at the lower of
5% or CPI. The remaining distributable income, after payment
of distributions to A linked unitholders, accrues to B linked
unitholders. At 30 June 2013 there were 47.4 million A linked
units in issue and 106.4 million B linked units in issue.
Synergy completed a unit placement to fund the acquisition
of Setsing Crescent Shopping Centre and Gugulethu Square
Shopping Centre ("The Ideas Fund Properties") during the
course of the year which resulted in R376 million in equity
being raised. The additional linked units were listed on the JSE on
13 August 2012.
Synergy applied to the JSE for Real Estate Investment Trust
("REIT") status on 7 June 2013, and on 12 July 2013 the
application was formally approved by the JSE. Accordingly,
Synergy has been granted REIT status with effect from
1 July 2013.
Financial results
Synergy's Board is pleased to announce a distribution of 42.34
cents per A linked unit and 26.63 cents per B linked unit for the
six months ended 30 June 2013. Combined with the interim
distribution of 40.32 cents per A linked unit and 24.75 cents per
B linked unit, this gives an annual distribution of 82.66 cents per
A linked unit and 51.38 cents per B linked unit. This is in line with
the forecasts communicated to investors on SENS on 6 June
2012 and 31 July 2012, respectively.
The trading period to June 2013 takes into account 14
properties, 12 of which were on the balance sheet for the full
financial year. The Ideas Fund Properties transferred to Synergy
at the end of August 2012.
Operational performance
Capital Land Asset Management ("Capital Land") directly
performs all property management and asset management
functions for Synergy. This direct management strategy was
implemented from 1 October 2012 to drive performance
through a focused, direct management of all operational aspects
of Synergy's property portfolio and has yielded positive results.
At 30 June 2013, retail vacancies were 3.3% of retail gross
lettable area ("GLA") compared to 4.6% in the prior year. Rental
reversions across the portfolio have trended upwards by 6.9%
and a tenant retention ratio of 88% was achieved during the year
under review. Strong leasing performance has been driven by
pro-actively targeting the under-let components of the portfolio.
Of retail GLA, 0.9% is structured vacancies at Ermelo Game
Shopping Centre and Richdens Village Shopping Centre, where
opportunities for re-development have been identified and are
in the process of being evaluated. This area is included in the
vacancy ratio of 3.3%.
Improvement in the overall quality of the tenant mix is a key
focus area. Since 30 June 2012 the ratio of national tenants in
the portfolio has increased from 81% to 86%. This is in line with
Synergy's target national tenant ratio of 85.0% or higher.
Condensed statement of comprehensive income
Audited Audited
Year ended Year ended
30 June 30 June
2013 2012
R R
REVENUE
Property portfolio 253 366 497 53 062 853
Recoveries and contractual rental revenue 240 010 489 48 345 736
Straight-line rental income accrual 13 356 008 4 717 117
Rental revenue 253 366 497 53 062 853
Property operating costs (90 732 526) (15 406 778)
Administration costs (12 875 626) (4 746 371)
Net operating profit 149 758 345 32 909 704
Fair value adjustments 149 862 250 143 821 989
Changes in fair values of investment property 160 657 440 153 134 246
Adjustment resulting from straight-lining of rental revenue (13 356 008) (4 717 117)
Changes in fair value of swaps 2 560 818 (4 595 141)
Profit from operations 299 620 595 176 731 692
Non-recurring capital raising expenses (2 500 954) (10 744 308)
Net finance (expense)/ income (43 110 632) 2 520 789
Finance income 1 597 227 8 799 045
Finance costs (48 096 897) (6 126 456)
Interest received on linked units issued cum distribution 3 884 150
Amortisation of loan raising costs (495 112) (151 800)
Profit before debenture interest and taxation 254 009 009 168 508 173
Debenture interest (93 786 818) (30 865 174)
Profit before taxation 160 222 191 137 642 999
Taxation 28 520 195 (28 140 834)
Profit for the period attributable to Synergy shareholders 188 742 386 109 502 165
Total comprehensive income for the year 188 742 386 109 502 165
Reconciliation of earnings, headline earnings and distributable earnings
Profit for the period attributable to Synergy shareholders 188 742 386 109 502 165
Debenture interest 93 786 818 30 865 174
Basic earnings attributable to linked unitholders 282 529 204 140 367 339
Changes in fair values of investment properties (net of deferred taxation) (176 299 168) (119 419 393)
Changes in fair value of investment properties (147 301 432) (148 417 129)
Deferred taxation (28 997 736) 28 997 736
Headline profit to linked unitholders 106 230 036 20 947 946
Non-recurring capital raising expenses 2 500 954 10 744 308
Amortisation of loan raising costs 495 112 151 800
Straight-line rental income accrual (13 356 008) (4 717 117)
Changes in fair value of swaps (net of deferred taxation) (2 083 276) 3 738 239
Changes in fair value of swaps (2 560 818) 4 595 141
Deferred taxation 477 542 (856 902)
Distributable earnings 93 786 818 30 865 176
Distribution for the period 93 786 818 30 865 176
Distributed to A linked units 19 092 408 11 006 010
Distributed to B linked units 26 322 286 19 859 166
To be distributed to A linked units* 20 048 923
To be distributed to B linked units* 28 323 201
Total distributions 93 786 818 30 865 176
Actual number of A linked units in issue 47 352 203 24 889 156
Actual number of B linked units in issue 106 352 670 73 113 070
Weighted number of A linked units in issue 44 705 871 13 600 632
Weighted number of B linked units in issue 102 436 772 63 101 129
Earnings per A share (cents) 128,27 142,76
Earnings per A linked unit (cents) 215,82 223,69
Earnings per B share (cents) 128,27 142,76
Earnings per B linked unit (cents) 181,62 174,24
Headline earnings/(loss) per A share (cents) 8,46 (12,93)
Headline earnings per A linked unit (cents) 96,01 67,99
Headline earnings/(loss) per B share (cents) 8,46 (12,93)
Headline earnings per B linked unit (cents) 61,80 18,54
Distribution per A linked unit paid (cents) 40,32 44,22
Distribution per A linked unit payable (cents) 42,34
Distribution per B linked unit paid (cents) 24,75 19,53
Pre-listing distribution per B linked unit paid (cents) 9,30
Distribution per B linked unit payable (cents) 26,63
* This amount will be distributed on 23 September 2013.
The Fund has no dilutionary instruments in issue.
Condensed statement of financial position
Audited Audited
Year ended Year ended
30 June 30 June
2013 2012
R R
ASSETS
Non-current assets 1 877 453 361 1 171 300 000
Investment property 1 877 074 000 1 171 300 000
Fair value of property portfolio for accounting purposes 1 859 000 875 1 166 582 883
Straight-line rental income accrual 18 073 125 4 717 117
Deferred taxation 379 361
Current assets 29 293 927 12 977 115
Trade and other receivables 23 989 593 8 819 402
Cash and cash equivalents 5 304 334 4 157 713
Total assets 1 906 747 288 1 184 277 115
EQUITY AND LIABILITIES
Stated capital and reserves 299 781 600 110 482 187
Stated capital 1 537 049 980 022
Reserves 298 244 551 109 502 165
Non-current liabilities 1 525 892 224 1 038 220 654
Debenture capital 952 971 381 581 412 553
Interest-bearing liabilities 570 886 520 424 072 126
Derivative financial instruments 2 034 323 4 595 141
Deferred taxation 28 140 834
Current liabilities 81 073 464 35 574 274
Trade and other payables 32 701 340 10 286 330
Debenture interest payable 48 372 124 25 287 944
Total equity and liabilities 1 906 747 288 1 184 277 115
Net asset value per linked unit * 8,15 7,06
Net asset value per A linked unit * ^ 11,58 8,79
Net asset value per B linked unit * 6,62 6,47
* Net asset value includes total equity attributable to equity holders and linked debentures.
* (6)0-day volume weighted average trading price at 30 June 2013, limited to combined net asset value, in accordance with the provisions of
the Fund's debenture trust deed.
Condensed statement of changes in equity
Audited Audited
Year ended Year ended
30 June 30 June
2013 2012
R R
Balance at the beginning of the year 110 482 187 127 031
Repurchase of shares (70)
Issue of linked units 557 027 853 061
Total comprehensive income for the year 188 742 386 109 502 165
Total stated capital and reserves 299 781 600 110 482 187
Condensed statement of cash flows
Audited Audited
Year ended Year ended
30 June 30 June
2013 2012
R R
Cash flows from operating activities
Cash generated from operations 141 146 202 19 249 653
Interest income 5 481 377 8 799 045
Interest paid (118 799 535) (11 855 486)
Net cash inflow from operating activities 27 828 044 16 193 212
Net cash outflow from investing activities (545 116 560) (1 018 165 754)
Net cash inflow from financing activities 518 435 137 942 983 781
Net movement in cash and cash equivalents 1 146 621 (58 988 761)
Cash and cash equivalents at the beginning of the year 4 157 713 63 146 474
Cash and cash equivalents at the end of the year 5 304 334 4 157 713
Property portfolio
At 30 June 2013 Synergy's property portfolio comprised 14 properties with a total market value of R1.877 billion.
The recognition of investment property at fair value at 30 June 2013 resulted in a fair value gain of R160.7 million in the current
financial year.
Information relating to the Ideas Fund Properties acquired during the year ended 30 June 2013 is set out in the table below:
Effective date of Latest valuation
Property Location GLA m2 transfer R
Setsing Crescent Shopping Centre Phuthaditjhaba, Free State 21 542 23 August 2012 274 191 000
Gugulethu Square Shopping Centre Gugulethu, Western Cape 25 338 30 August 2012 324 462 000
Total acquisitions 46 880 598 653 000
Properties transferring to Synergy after 30 June 2013
On 14 May 2013, Synergy concluded an agreement to acquire
Atlantis for a preliminary purchase price of R334 million and
with a market value of R353.8 million as at 1 September 2013.
This acquisition has an effective date of 1 September 2013
and the property is anticipated to transfer to Synergy during
November 2013.
Following the implementation of this acquisition, Synergy's
property portfolio will consist of 15 shopping centres situated
in Gauteng, KwaZulu-Natal, North West, Western Cape,
Limpopo, Mpumalanga and Free State.
New developments and upgrades
Synergy has identified, and is currently evaluating, further
opportunities to improve its portfolio through redevelopments
at Ermelo Game Shopping Centre in Ermelo, Mpumalanga
and Richdens Village Shopping Centre in Hillcrest, KwaZulu-
Natal and a refurbishment at Ruimsig Shopping Centre in
Roodepoort, Gauteng. Further information in respect of these
potential projects will be made available in due course.
Borrowings
Synergy had available loan facilities totalling R745 million as at
30 June 2013. A further R201 million facility was granted to
Synergy by Nedbank during July 2013 and will be utilised to
partly fund the acquisition of Atlantis.
The Fund had total borrowings of R570 million at 30 June 2013.
At the end of June 2013, interest rates were hedged on 73% of
total borrowings at a weighted average rate of 9.11%. Synergy's
total weighted average cost of borrowings at 30 June 2013
was 8.7%. The loan to value ratio of the property portfolio at
the end of June 2013 was 30.4%. At year end, Synergy had
unutilised long-term facilities of R174 million. A large portion
of this will be utilised to fund the balance of the purchase price
in relation to the acquisition of Atlantis.
Directorate
Uys Meyer ("Uys") has resigned as Financial Director of
Synergy effective 1 August 2013. Uys continues to serve on
the Board of the Fund as a Non-executive Director. Anton
Raubenheimer has been appointed as the new Financial
Director of Synergy with effect from 1 August 2013.
Prospects
The forecast distributions for 2014 for Synergy's A linked
units will be 86.79 cents per unit, in line with information
released on SENS on 6 June 2012. The Board expects
Synergy's B linked unit distributions for 2014 to increase
by between 12% and 16% compared to 2013. This forecast
includes income from Atlantis from 1 September 2013, the
effective date of its acquisition, and is based on assumptions
detailed in the Atlantis financial effects announcement
released on SENS on 25 June 2013 and further assumes
that the current economic environment will remain stable.
The forecast information has not been reported on by the
independent reporting accountants, Moore Stephens BKV Inc..
Payment of final distributions
Notice is hereby given that the Board of Directors has
declared a final distribution of 42.34 cents per A linked unit
and 26.63 cents per B linked unit for the six months ended
30 June 2013. The issued linked unit capital at the declaration
date comprises 47 352 203 A linked units and 106 352 670
B linked units.
The interest distributions are not subject to withholdings tax.
The salient dates for the final distributions will be as follows:
2013
Last day to trade cum distribution Friday, 13 September
Linked units trade ex distribution Monday, 16 September
Record date Friday, 20 September
Payment date Monday, 23 September
Preparation, accounting policies and audit opinion
The summarised audited financial statements for the year
ended 30 June 2013 have been prepared in accordance with
International Financial Reporting Standards and presented in
accordance with the minimum content, including disclosures,
prescribed by IAS 34 applied to year end reporting and AC
500 Series issued by the Accounting Practices Board, the JSE
Listings Requirements and the requirements of the South
African Companies Act, 2008. The summarised financial
statements are prepared on a going concern basis and
Synergy's accounting policies have been applied consistently
to all periods presented. The summarised financial statements,
which comprise the statement of financial position at
30 June 2013 and the statement of comprehensive income,
statement of changes in equity and statement of cash flows
for the year then ended, have been audited by the Fund's
independent external auditors, Moore Stephens BKV Inc., and
their unmodified audit report is available for inspection at the
Fund's registered office situated at 3rd Floor, 200 on Main, Cnr
Main and Bowwood Roads, Claremont.
This report was compiled under the supervision of
Anton Raubenheimer CA (SA), the newly appointed Financial
Director of the Fund.
The directors are not aware of any matters or circumstances
arising subsequent to 30 June 2013 that require any additional
disclosure or adjustment to the financial statements and which
are not disclosed in this announcement.
By order of the Board
Synergy Income Fund Limited
Cape Town
26 August 2013
Directors: M Kuscus* (Chairperson), W Brooks(CEO), A Raubenheimer (FD), U Meyer^, S Segar*, M Mdlolo^, A Ramsden*,
L Mtumtum* *Non-executive Independent ^Non-executive
Registered office: 3rd Floor, 200 on Main, Cnr Main and Bowwood Roads, Claremont, 7708
Transfer secretaries: #Computershare Investor Services Proprietary Limited,
Sponsor: Java Capital
Company secretary: Probity Business Services Proprietary Limited
SYNERGY INCOME FUND LIMITED
3rd Floor, 200 on Main, Cnr Main and Bowwood Roads, Claremont, 7708. Postnet Suite I, Private Bag X1005, Claremont, 7735
www.synergyincomefund.com
Date: 26/08/2013 11:58:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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