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SYC - Sycom Property Fund - Unaudited condensed interim financial statements
SYCOM PROPERTY FUND
Share Code: SYC
ISIN : ZAE000019303
("Sycom")
UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
CONDENSED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED
30 SEPTEMBER 2011
Unaudited Unaudited Audited
six months six twelve
to 30 months to months to
Sep 2011 30 Sep 31 Mar 2011
2010
(R`000) (R`000) (R`000)
Rental revenue 261 368 243 852 493 355
Contractual rental revenue
and recoveries 258 245 244 851 493 397
Straight-line rental income
accrual 3 123 (999) (42)
Property operating (47 450) (41 534) (85 379)
expenses
Net rental and 213 918 202 318
related revenue 407 976
Investment income
7 013 4 523 10 700
Fair value gain/(deficit) on (46 228)
investment property and 29 528 294 764
investments
Fair value (deficit)/gain on
investment property (3 123) 999 386 297
Fair value gain/(deficit) on (47 227)
listed investments 32 651 (91 533)
Administrative (14 832) (14 160) (27 683)
expenses
Service charge (13 454) (12 786) (25 998)
Other net administrative (1 378) (1 374) (1 685)
expenses
Profit before net 235 627 146 453 685 757
finance costs
Net finance costs (30 507) (35 001) (54 701)
Interest income 18 449
7 231 4 864
Interest expense (34 995) (31 688) (70 781)
Fair value adjustment on (2 743) (8 177) (2 369)
interest rate and cross
currency swaps
Profit before 205 120 111 452 631 056
income tax
Taxation (1 498)
- -
Profit for the period 205 120 111 452 629 558
Basic earnings per
unit - cents 94.88 51.55 291.22
RECONCILIATION OF EARNINGS TO HEADLINE EARNINGS AND DISTRIBUTABLE
EARNINGS
Total comprehensive 205 120 111 452 629 558
income
Unrealised deficit/(surplus) (384 799)
on revaluation of investment 3 123 (999)
properties, net of deferred
tax
Headline Earnings 208 243 110 453 244 759
Straight-line rental income (3 123)
accrual 999 42
Unrealised deficit on swaps
2 743 8 177 2 369
Unrealised (gain)/deficit on (32 651) 47 227
revaluation 91 533
of investment in securities
Distributable 175 212 166 856 338 703
earnings
cents cents cents
Basic earnings per
unit 94.88 51.55 291.22
Weighted average earnings per
unit 94.88 52.17 292.96
Headline earnings
per unit 96.33 51.09 113.22
Weighted headline earnings
per unit 96.33 51.70 113.90
Distributable
earnings per unit 81.05 77.18 156.67
Distribution per
unit 81.05 77.18 156.67
Number of units in 216 182 216 182
issue (`000) 216 182
Number of weighted average 216 182 214 898
units in issue (`000) 213 622
CONDENSED STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2011
Unaudited Audited at
at Unaudited
at
30 Sep 30 Sep 31 Mar
2011 2010 2011
(R`000) (R`000) (R`000)
ASSETS
Property Assets 5 582 985 5 171 320 5 570 533
Investment property 5 428 548 5 020 967 5 419 219
Straight-line lease 154 437 151 314
income accrual 150 353
Other non current
assets
Investment in 246 454 213 803
securities 258 695
Current assets 219 731 188 125
185 486
Rental and other 63 069 53 148
receivables 58 991
Cash and cash 156 662 129 134
equivalents 132 338
Total assets 6 049 170 5 615 501 5 972 461
UNITHOLDERS` FUNDS AND
LIABILITIES
Unitholders` funds 4 930 215 4 554 037 4 900 307
Unitholders` 1 863 856 1 863 845 1 863 856
capital
Non-distributable 3 066 359 2 690 192 3 036 451
reserves
Non-current 821 019 802 400
liabilities 788 019
Unsecured 819 521 788 019 800 902
borrowings
Deferred tax
1 498 - 1 498
Current liabilities 297 936
273 445 269 754
Trade and other 88 769 69 668
payables 66 696
Other financial 33 955 36 921
liabilities 31 212
Unitholders for 175 212 171 846
distribution 166 856
Total unitholders` funds and 6 049 170 5 615 501 5 972 461
liabilities
Net asset value per unit - 2 281 2 107 2 267
cents
CONDENSED STATEMENT OF CHANGES IN UNITHOLDERS` FUNDS FOR THE SIX
MONTHS ENDED 30 SEPTEMBER 2011
Capital Non Retained Total
distributa earnings
ble
reserve
(R`000) (R`000) (R`000) (R`000)
Balance at 31 March 1661615 2 745 596 4 407 211
2010 -
Transactions with
owners,recorded
directly in equity
New unit issues, 202 230 202 230
net of capital - -
issue costs
Total profit or 111 452
loss and - - 111 452
comprehensive
income for the
period
Transfer from non (55 404) 55 404
distributable - -
reserve
Unitholders (166 856) (166 856)
distribution - -
Balance at 30 1863 845 2 690 192 4 554 037
September 2010 -
Transactions with
owners, recorded
directly in equity
Capital issue costs
refunded 11 - - 11
Total profit or 518 106
loss and - - 518 106
comprehensive
income for the
period
Transfer to non 346 259 (346 259)
distributable - -
reserve
Unitholders (171 847) (171 847)
distribution - -
Balance at 31 March 1863 856 3 036 451 4 900 307
2011 -
Transactions with
owners, recorded - - - -
directly in equity
Total profit or 205 120
loss and - - 205 120
comprehensive
income for the
period
Transfer to non 29 908 (29 908)
distributable - -
reserve
Unitholders (175 212) (175 212)
distribution - -
Balance at 30 1863 856 3 066 359 4 930 215
September 2011 -
CONDENSED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30
SEPTEMBER 2011
Unaudited Audited at
at Unaudited
at
30 Sep 30 Sep 31 Mar
2011 2010 2011
(R`000) (R`000) (R`000)
Cash generated from operating
activities
Cash generated from operating 207 773 356 481
activities 190 852
Interest received
7 231 4 864 9 582
Interest paid (36 351) (33 242) (68 329)
Dividend received 13 198
- 8 905
Distribution paid (171 846) (175 912) (342 776)
Net cash inflow/(outflow) 20 005 (13 438) (36 137)
from operating activities
Cash flows from investing
activities
Additions to investment (11 096) (34 372) (28 462)
property
Subscription to rights issue- (92 144) (91 557)
SESCF -
Net cash outflow from (11 096) (126 516) (120 019)
investing activities
Cash flows from financing
activities
Proceeds on issue 47 957
of new units - 47 957
Capital issue costs (1 463) (1 448)
-
Increase in 18 619 73 595
borrowings 86 578
Net cash inflow from 18 619 133 087
financing activities 120 089
Net increase/(decrease) in 27 528 (19 865) (23 069)
cash and cash balances
Cash and cash equivalents at 129 134 152 203
the beginning of the period 152 203
Cash and cash equivalents at 156 662 132 338 129 134
the end of the period
NOTES
1. ACCOUNTING
POLICIES
The unaudited financial report has been prepared in accordance with
the requirements of International Accounting Standard 34: Interim
Reporting ("IAS 34") the JSE Listings Requirements and the Collective
Investment Schemes Control Act of 2002. The accounting policies are
consistent with those applied in the prior year.
2. CONDENSED SEGMENTAL RESULTS
for the 6 months ended 30
September 2011
Total Retail Office
(R`000) (R`000) (R`000)
Segment revenue 258 245 116 918
141 327
Straight-line
rental income 3 123 (990) 4 113
accrual
Dividend income
7 013 7 013 -
Total revenue 268 381 121 031
147 350
Operating (47 450) (24 345) (23 105)
expenditure
Net finance cost
1 973 1 611 362
Segmental net operating 222 904
income 124 616 98 288
Fair value
adjustments
South Africa (3 123) (4 113)
990
International 32 651 32 651
-
Segmental Earnings 252 432
158 257 94 175
Unallocated
expenditure
Operating (14 832)
expenditure
Net finance cost (29 737)
Net operating 207 863
income
Fair value adjustment to (2 743)
interest rate and cross
currency swaps
Profit before income tax 205 120
Investment in Property and 5 829 439 3 279 051 2 550 388
securities
CONDENSED SEGMENTAL RESULTS
for the 6 months ended 30
September 2010
Total Retail Office
(R`000) (R`000) (R`000)
Segment revenue 244 851 111 552
133 299
Straight-line (1 841)
rental income (999) 842
accrual
Dividend income
4 523 4 523 -
Total revenue 248 375 112 394
135 981
Operating (41 534) (19 449) (22 085)
expenditure
Net finance cost
548 436 112
Segmental net operating 207 389
income 116 968 90 421
Fair value
adjustments
South Africa
999 1 841 (842)
International (47 227) (47 227)
-
Segmental Earnings 161 161 71 582
89 579
Unallocated
expenditure
Operating
expenditure (14 160)
Net finance cost (27 372)
Net operating 119 629
income
Fair value adjustment to
interest rate and cross (8 177)
currency swaps
Profit before income tax
111 452
Investment in Property and 5 430 015 3 069 591 2 360 424
securities
COMMENTARY
1. REVIEW OF RESULTS AND OPERATIONS
The board of Sycom Property Fund Managers Limited (`SPFM`) reports a
distribution of 81.05 cents per unit (cpu) for the six months ended 30 September
2011, an increase of 5% over the comparative period last year.
Office market
There was a pleasing turn-around in Sycom`s office portfolio, as vacancies
reduced much more quickly than had been expected, from 11.7% at 31 March 2011 to
the current level of 7.1%. This represents a net reversal in vacancies of
7,174m2. Much of this letting took place towards the end of the six month period
under review, and as a result, the effects of the vacancy take-up will only
start to come through in the second half of the 2012 financial year and into the
following year, as the new signings take occupation over the coming months.
Also pleasing was the increase in the retention ratio to 95% for leases that
expired over the six months ended 30 September. In the previous year, 90% of
expiries were retained, and in the year to March 2010, only 60% of expiring
leases were renewed. The high retention levels and the strong letting activity
both underline the quality of Sycom`s office portfolio, which has performed
substantially better than the office sector as a whole based on reported
statistics from SAPOA.
Against the background of this positive leasing activity, net rentals declined
from R131.82/m2 on expiry to R124.41/m2 on average across the 54,479m2 of
agreements concluded in the six months to 30 September 2011.
In the next six months, leases for 10,466m2 will expire at an average net rental
of R138.41/m2, and these are expected to be renewed at R134/m2, representing a
3.2% negative reversion.
Retail
Sycom`s South African retail portfolio generated turnover growth of 5.9% for the
six months to 30 September 2011. Paarl Mall was the top performer, with turnover
growth of 8.05%, and Vaal Mall continued to deliver good results, with turnover
growth of 7.87%. Somerset Mall, Sycom`s most mature retail asset, showed a
particularly pleasing result with turnover growth of 6.43%. Only N1 City
disappointed somewhat with growth of 2.66%, although off a high base for May and
June last year, when the mall`s turnover surged during the soccer world cup.
This world cup effect was significantly greater at N1 City Mall than at any of
Sycom`s other retail centres.
Segmental contribution to retail turnover for the six months is shown in the
table below. It reflects a combined contribution of 57.2% from supermarkets
(food majors) and apparel, consistent with the long-term contribution from these
segments.
Segment Segment: % of Turnover
Food Majors 25.6%
Apparel 31.6%
Home Decor & Improvement 4.9%
Electronics & Music 11.5%
Game 4.5%
Health & Beauty 9.2%
Food Service & Entertainment 7.4%
Other 5.4%
100.0%
The homeware, electronics and apparel segments showed steady growth, but the
discount segment disappointed, once again because of the high base set in May
and June last year leading up to the soccer world cup. Particularly impressive
was the growth of 5.4% from the food majors, whose turnover growth rates have
tended to stagnate over the previous 18 months.
The major shift in the rent to turnover ratios was a positive change of nearly
6% for the homeware segment, showing that the growth in tenant turnovers
exceeded the growth in their rentals paid. Apparel and food services also gained
ground as turnovers grew faster than rentals. The ratios for food majors,
electronics and health and beauty deteriorated slightly, but still remain
comfortably within accepted norms for these segments. The discount segment gave
up the most ground in terms of its rent to turnover ratio, but still remains at
less than 4% and therefore in a comfortable range. Overall, the picture emerging
from the analysis of these ratios is that tenant turnovers are growing
comfortably in line with rentals, and that rental affordability is therefore not
under any threat.
During the period under review, leases totalling 32,860m2 terminated at an
average rental of R147.29/m2. Leases totalling 32,487mSquared were concluded at
an average rental of R153.91/m2. The retail vacancy remained fairly constant in
the period at approximately 1.9%. Expiries in the remaining six months of the
2012 financial year will amount to 10,996m2, terminating at an average rental of
R171.79/m2. These leases are expected to be renewed at an average rate of
R183.30/m2.
2. BORROWINGS
At 30 September 2011, R820 million of the existing facility of R950m had been
utilised. The weighted average borrowing cost is 8.4%. Sycom`s gearing level is
presently 14.1%. Including the effects of its investment in Stenham European
Shopping Centre Fund ("SESCF"), Sycom`s `see-through` gearing level is 21.15%.
Sycom has negotiated a new 5 year facility of R700m at a rate of prime minus
1.7%, taking its total facilities to R1.65bn.
Sycom Borrowings
Type Maturity Effective Value % of
Date total
Rate R`m
SWAP 1 June 8.77% 100 12.2%
2012
SWAP 17-Mar-14 11.15% 200 24.4%
SWAP 09-Apr-14 10.86% 100 12.2%
400 48.8%
Floating 25-Nov-14 6.50% 420 51.2%
8.44% 820 100.0%
Sycom
Facilities
Loan Rate R`m
expiry
prime less 950
25-Nov-14 2.5%
prime less 700
01-Dec-16 1.7%
TOTAL FACILITIES 1 650
3. STENHAM EUROPEAN SHOPPING CENTRE FUND ("SESCF")
SESCF has negotiated an extension of its senior debt facility of Euro209m to 18
July 2012, on the same credit margin. Post the rights issue that took place in
the prior period, Sycom`s shareholding is 22.748%. Whilst the performance of the
underlying Nova Eventis shopping centre in Leipzig, Germany, remains steady, the
board of SPFM remains committed to pursuing a purely South African agenda, and
will continue to seek opportunities to dispose of its interest in SESCF on the
most favourable terms.
4. FORWARD LEASE EXPIRIES
The expiry profile by Rental Income is shown below:
Total vacancy Mar- Mar- Mar- Mar- Mar- therea
12 13 14 15 16 fter
Retail 51.4% 0.9% 4.5% 7.9% 9.4% 6.8% 9.5% 12.4%
48.6% 2.6% 3.5% 4.8% 6.0% 7.7% 7.9% 16.1%
Offices
Total 100.0% 3.5% 8.0% 12.7% 15.4% 14.5% 17.4% 28.5%
5. VACANCIES AND BAD DEBTS
The table below provides details of Sycom`s vacancies at September 2011, March
2011 and March 2010, expressed by area.
Sep-11 Mar-11 Mar-10
Retail vacancy 1.90% 1.70% 1.70%
Office vacancy 7.10% 11.70% 10.20%
Total vacancy 4.50% 6.60% 5.90%
The impairment provision at 30 September 2011 amounted to R2.4m compared to
R2.2m at 31 March 2011. Bad debts for the six months amounted to R1.07m. The bad
debt and tenant arrears positions have stabilized and the board does not expect
any abnormal provisions or write offs to become necessary as the economic
climate continues to slowly improve.
6. UNIT HOLDER SUMMARY
Sycom`s major unit holders at 30 September 2011 are shown below, with a
comparison to 31 March 2011.
Major unitholders
30-Sep-11 31-Mar-11
Hyprop (including 39.0% 39.0%
Attfund)
Acucap 19.8% 19.8%
PIC (GEPF) 5.8% 6.0%
Stanlib 3.5% 3.9%
Nedbank 2.7% 2.7%
Old Mutual 2.7% 2.7%
Investec 2.6% 0.1%
76.1% 74.2%
7. ACQUISITIONS
As announced on 10 November 2011, Sycom made two acquisitions for a total of
R271m at a forward yield of 8%, comprising the remaining 30% of Paarl Mall that
Sycom does not already own, and the Kraft Foods Building in the Harrowdene
Office Park. These acquisitions are consistent with Sycom`s strategy of
acquiring increased holdings in assets where it already has an interest. The
financial effects are neutral on acquisition, but both assets have positive
growth prospects. Sycom will continue to actively seek opportunities to expand
its portfolio in this manner.
8. PROSPECTS
With its retail portfolio continuing to deliver steady growth and with the
office portfolio performing ahead of expectations in terms of the rate of
vacancy reversal, the board of SPFM expects distribution growth in the order of
8% for the second half of the year, compared to the second half of the 2011
financial year.
The above information has not been reviewed or reported on by Sycom`s auditors.
9. PAYMENT OF INTEREST
Notice is hereby given of the declaration of distribution number 53 in respect
of the six months to 30 September 2011. The interim distribution of 81.05
(eighty one comma zero five) cents per unit has been approved in respect of the
six month period ended 30 September 2011. The last date to trade the units cum
distribution is Friday, 2 December 2011 and the record date will be Friday, 9
December 2011. The units will start trading ex-distribution from Monday, 5
December 2011. Distributions will be made to unit holders on Monday, 12 December
2011.
Unit certificates may not be dematerialised or rematerialised between Monday, 5
December 2011 and Friday, 9 December 2011 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
17 November 2011
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 : ZAE 000019303
Directors: GK Everingham ' (Chairman), SM Moloko ' (Deputy Chairman), FM
Berkeley ',
JPD Flanagan ', BM Stocks ',
PA Theodosiou*# (CEO), CB Marlow*, GR Jones*
' Independent non-executuive, * Executive , # British,
Company Secretary: HHO Steyn
Sponsor
Nedbank Capital
Date: 17/11/2011 07:05:00 Supplied by www.sharenet.co.za
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