Wrap Text
unaudited condensed interim results for the six months ended 30 September 2012
SYCOM PROPERTY FUND
A Collective Investment Scheme in Property registered in terms of the Collective
Schemes Control Act, No 45 of 2002 and managed by Sycom Property Fund
Managers Limited (Registration number 1986/002756/06)(“Sycom” or “the fund”)
JSE Share Code: SYC
ISIN : ZAE 000019303
UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED 30 SEPTEMBER 2012
CONDENSED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30
SEPTEMBER 2012
Audited
Unaudited Unaudited twelve
six months six months months to
to 30 Sep to 30 Sep 31 Mar
2012 2011 2012
(R'000) (R'000) (R'000)
Revenue 297 992 261 368 544 157
Contractual rental revenue and recoveries 286 772 258 245 529 820
Straight-lining of rental revenue adjustments 11 220 3 123 14 337
Direct property operating expenses (52 734) (47 450) (97 009)
Net rental and related
revenue 245 258 213 918 447 148
Investment income 7 581 7 013 13 781
Fair value changes on investment
property and listed investments (35 247) 29 528 335 919
Fair value (deficit)/gain on investment
property (11 220) (3 123) 312 966
Net change in fair value of listed investment (24 027) 32 651 22 953
Administrative expenses (17 946) (14 832) (30 412)
Service charge (17 013) (13 454) (28 040)
Other administrative expenses (933) (1 378) (2 372)
Profit before net finance
costs 199 646 235 627 766 436
Net finance costs (14 890) (30 507) (33 288)
Interest income 24 612 7 231 40 847
Interest expense (38 388) (34 995) (68 981)
Net change in fair value of derivative financial
instruments at fair value through profit and
loss (1 114) (2 743) (5 154)
Profit before taxation 184 756 205 120 733 148
Taxation - - 1 594
Profit for the year 184 756 205 120 734 742
Basic earnings per unit - cents 74.32 94.88 333.59
RECONCILIATION OF EARNINGS TO HEADLINE EARNINGS AND DISTRIBUTABLE
EARNINGS
Total comprehensive income 184 756 205 120 734 742
Unrealised deficit/(surplus) on revaluation of
investment properties, net of deferred tax 11 220 3 123 (314 560)
Headline Earnings 195 976 208 243 420 182
Straight-line rental income accrual (11 220) (3 123) (14 337)
Unrealised deficit on derivative financial
instruments 1 114 2 743 5 154
Unrealised deficit/(surplus) on revaluation
of listed investment 24 027 (32 651) (22 953)
Distributable earnings 209 897 175 212 388 046
cents cents cents
Earnings per unit (cents):
Basic earnings per unit 74.32 94.88 333.59
Headline earnings per unit 78.83 96.33 190.77
Distribution per unit 84.43 81.05 166.66
Number of units in issue ('000) 248 604 216 182 248 604
Number of weighted average units in issue
('000) 248 604 216 182 220 256
CONDENSED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2012
Unaudited Unaudited
at at Audited at
30 Sep 30 Sep 31 Mar
2012 2011 2012
(R'000) (R'000) (R'000)
ASSETS
Property Assets 6 228 966 5 582 985 6 114 228
Investment property 6 046 002 5 428 548 5 948 577
Straight-line lease income
accrual 182 964 154 437 165 651
Other non current assets 277 794 246 454 236 852
Listed Investment 277 698 246 454 236 756
Deferred Taxation 96 - 96
Current assets 676 773 219 731 953 384
Rental and other receivables 67 167 63 069 64 561
Dividends receivable 7 581 - 6 768
Cash and cash equivalents 602 025 156 662 82 055
Total assets 7 183 533 6 049 170 7 304 464
UNITHOLDERS' FUNDS AND LIABILITIES
Unitholders' funds 5 937 054 4 930 215 5 962 195
Unitholders' capital 2 579 048 1 863 856 2 579 048
Non-distributable reserves 3 358 006 3 066 359 3 383 147
Non-current liabilities 919 790 821 019 833 466
Borrowings 919 790 819 521 833 466
Deferred tax - 1 498 -
Current liabilities 326 689 297 936 508 803
Trade and other payables 79 312 88 769 259 604
Derivative financial instruments 37 480 33 955 36 366
Unitholders for distribution 209 897 175 212 212 833
Total unitholders' funds and
liabilities 7 183 533 6 049 170 7 304 464
Net asset value per unit - cents 2 388 2 281 2 398
CONDENSED STATEMENT OF CHANGES IN UNITHOLDERS' FUNDS FOR THE SIX MONTHS
ENDED 30 SEPTEMBER 2012
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 - - - -
Total comprehensive income
for the year - - 205 120 205 120
Transfer to non-distributable
reserve - 29 908 (29 908) -
Unitholders distribution - - (175 212) (175 212)
Balance at 30 September
2011 1 863 856 3 066 359 - 4 930 215
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 - - 529 621 529 621
Transfer to non-
distributable reserve - 316 788 (316 788) -
Unitholders distribution - - (212 833) (212 833)
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 - - 184 756 184 756
Transfer to non-
distributable reserve - (25 141) 25 141 -
Unitholders distribution - (209 897) (209 897)
Balance at 30 September
2012 2 579 048 3 358 006 - 5 937 054
CONDENSED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 SEPTEMBER
2012
Unaudited Unaudited
at at Audited at
30 Sep 30 Sep 31 Mar
2012 2011 2012
(R'000) (R'000) (R'000)
Cash generated from operating activities
Cash generated from operations 215 055 207 773 404 669
Investment Property acquisitions accrued for
at March 2012 and paid on transfer date (181 911) - 181 911
Interest received 24 612 7 231 19 970
Interest paid (39 037) (36 351) (73 891)
Dividend received 6 860 13 198 13 198
Distribution paid (212 833) (171 846) (347 059)
Net cash (outflow)/inflow from operating
activities (187 254) 20 005 198 798
Cash flows from investing activities
Additions to investment property (114 089) (11 096) (214 336)
Subscription to rights issue- SESCF (64 969) - -
Net cash outflow from investing activities (179 058) (11 096) (214 336)
Cash flows from financing activities
Proceeds on issue of new units, net of capital
issue costs - - 736 069
Increase in borrowings 86 324 18 619 32 564
Net cash inflow from financing activities 86 324 18 619 768 633
Net (decrease)/ increase in cash and
cash balances (279 988) 27 528 753 095
Cash and cash equivalents at the beginning of
the period 882 055 129 134 129 134
Effect of exchange fluctuations on cash held (42) - (174)
Cash and cash equivalents at the end of
the period 602 025 156 662 882 055
NOTES
1. ACCOUNTING POLICIES
The unaudited financial report has been prepared in accordance with the requirements of
International Accounting Standards 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. SUMMARISED SEGMENTAL RESULTS
for the 6 months ended 30 September 2012
TOTAL RETAIL OFFICE
(R'000) (R'000) (R'000)
Segment revenue 286 772 155 266 131 506
Straight-line rental income
accrual 11 220 4 361 6 859
Dividend income 7 581 7 581
Total revenue 305 573 167 208 138 365
Operating expenditure (52 734) (26 623) (26 111)
Net finance cost 649 232 417
Segmental net operating income 253 488 140 817 112 671
Fair value adjustments
South Africa (11 220) (4 361) (6 859)
International (24 027) (24 027) -
Segmental Earnings 218 241 112 429 105 812
Unallocated expenditure
Operating expenditure (17 946)
Net finance cost (14 425)
Net operating income 185 870
Fair value adjustment to interest rate and
cross (1 114)
currency swaps
Profit before income tax 184 756
Investment in property and securities 6 506 664 3 720 683 2 785 981
3. SUMMARISED SEGMENTAL RESULTS
for the 6 months ended 30 September 2011
TOTAL RETAIL OFFICE
(R'000) (R'000) (R'000)
Segment revenue 258 245 141 327 116 918
Straight-line rental income
accrual 3 123 (990) 4 113
Dividend income 7 013 7 013 -
Total revenue 268 381 147 350 121 031
Operating expenditure (47 450) (24 345) (23 105)
Net finance cost 1 973 1 611 362
Segmental net operating income 222 904 124 616 98 288
Fair value adjustments
South Africa (3 123) 990 (4 113)
International 32 651 32 651 -
Segmental Earnings 252 432 158 257 94 175
Unallocated expenditure
Operating expenditure (14 832)
Net finance cost (29 737)
Net operating income 207 863
Fair value adjustment to interest rate and
cross (2 743)
currency swaps
Profit before income tax 205 120
Investment in property and securities 5 829 439 3 279 051 2 550 388
COMMENTARY
1. REVIEW OF RESULTS AND OPERATIONS
The board of Sycom Property Fund Managers Limited (‘SPFM’) reports a distribution of
84. 43 cents per unit (cpu) for the six months ended 30 September 2012, an increase
of 4.2% over the comparative period last year. With distribution growth of just under
6% expected in the second half of the financial year, these interim results are in line
with guidance provided for the full year to 31 March 2013.
Office portfolio
Demand for “A” grade offices continued to improve during the period under review,
with the vacancy rate declining from 5.1% at 31 March 2012 to 3.7% at the end of
September 2012. Leases were concluded on 14,787m 2 of GLA during the period, at an
average net rate of R136.83/m2. This was 9.1% lower than the average net expiry
rental of R150.59/m2 on the 12,584m2 which terminated over this period. The extent
of the negative reversion was slightly better than the than forecast decrease of
10.5% that was disclosed in Sycom’s March results announcement.
In the next six months, leases for 11,207m² will expire at an average net rental of
R143.62/m2, and these are expected to be renewed at R139.71/m2, representing a
2.7% negative reversion.
The sharp decline in the vacancy rate from its peak 18 months ago has been pleasing,
but to some extent its effects have been off-set by the continued trend in rental
reversions. With the average net rental of the Sycom office portfolio now at
R134.87/m², the board expects negative reversionary effects to reduce as the
divergence between contractual and market rentals diminishes.
Retail portfolio
Sycom’s South African retail portfolio continued to show good underlying growth, with
tenants reporting a 7.5% increase in their turnovers for the 12 months to 30
September 2012 compared to the same period in the previous year. Vaal Mall and N1
City were the top performers in terms of growth, both delivering double digit
increases in turnovers reported by tenants. Paarl Mall followed closely behind with
tenant turnover growth for the six months of 9%. Somerset Mall’s performance at
6.5% was pleasing for a mature asset. Fourways Crossing disappointed with a flat six
months, although the conclusion of new leasing deals on upper level retail space will
see an improvement in Fourways’ performance.
During the period under review, leases totalling 9,624m2 terminated at an average
rental of R192.75/m2. Leases totalling 9,784m² were concluded at an average rental
of R191.98/m2. The retail vacancy remained fairly constant in the period at
approximately 2.2%. Expiries in the remaining six months of the 2013 financial year
will amount to 13,909m2, terminating at an average rental of R193.02/m2. These
leases are expected to be renewed at an average rate of R194.90/m2.
2. ACQUISITIONS
Sycom announced its acquisition of the remaining 60% undivided share in The
Woodlands Office Park from the AECI Pension Fund on 11 July 2012. The board is
pleased to advise that the Competition Tribunal approved the transaction on 17
October 2012, so the acquisition is now unconditional.
Unitholders may be aware that offers have been made by two listed property
companies to acquire the assets of Fountainhead Property Trust (‘Fountainhead’),
including N1 City Mall, in which Sycom is a 42% co-owner. In terms of the
consortium agreement, Sycom has a pre-emptive right in respect of this asset.
Discussions have commenced with the AECI Pension Fund (‘AECI-PF’) regarding the
disposal of AECI-PF’s 50% interest in Somerset Mall, where Sycom also has a pre-
emptive right.
Sycom has entered into an agreement with Kristabel Developments (Pty) Ltd to
acquire on completion a new office building on the Cape Town Foreshore, strategically
located opposite the Cape Town Convention Centre, with good visibility and easy
access from both the N1 and the N2. The 15 storey building will have a GLA of
11,800m2 and a parking ratio of 5.1 bays per 100m2 of GLA. It will be constructed to
premium grade specifications, with appropriate use of green building technologies. In
terms of the acquisition agreement, the developer will provide a rental guarantee
equivalent to two full years of gross income, and this will be available to supplement
any shortfall in projected rentals for the first three years after completion in order to
mitigate Sycom’s exposure to vacancy risk in the lease-up phase. The purchase price
of R285.67m is based on an initial yield of 9,75%, and it is anticipated that the
development will be complete and ready for occupation by December 2014.
Construction of the new office building has commenced.
Sycom’s board will be considering various capital raising strategies as these and other
acquisition opportunities materialise over the coming months.
3. BORROWINGS
At 30 September 2012, R490 million of the existing facility of R1 650m had been
utilised. The weighted average borrowing cost is 9.1%. Sycom’s gearing level is
presently 8% but this will increase to 25% on payment of the R1.365bn purchase
price that will follow transfer of the undivided 60% share of the Woodlands Office
Park, expected by the end of November 2012. Sycom has negotiated a new 5 year
facility of R500m at a rate of prime less 1.80%, taking its total facilities to R2.15bn.
Type Maturity Date Effective Value
Rate R'm
SWAP 17-Mar-14 11.15% 200
SWAP 09-Apr-14 10.86% 100
300
Floating 25-Nov-14 6.00% 190
9.1% 490
Facilities
prime less
25-Nov-14 2.50% 950
prime less
01-Dec-16 1.70% 700
5 years from transfer prime less
date of 60% of Woodlands 1.80% 500
2 150
4. STENHAM EUROPEAN SHOPPING CENTRE FUND (‘SESCF’)
SESCF, refected as an investment, has concluded a four year loan facility of €170m
terminating in 2016. Post the rights issue that took place in the period under review, Sycom’s
shareholding increased from 22.748% to 22.93%. Whilst the performance of the underlying
Nova Eventis shopping centre in Leipzig, Germany remains steady, the board of SPFM has not
shifted from its strategy of maintaining Sycom’s focus as a purely South African property
fund, and will therefore continue to seek opportunities to dispose of its interest in SESCF on
the most favourable terms.
5. FORWARD LEASE EXPIRIES
The expiry profile by Rental Income is shown below:
Total Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 thereafter
Offices 47.1% 3.6% 6.7% 9.0% 8.4% 16.4% 3.0%
Retail 52.9% 6.0% 9.9% 8.4% 12.3% 10.8% 5.5%
Total 100.0% 9.5% 16.7% 17.4% 20.7% 27.2% 8.4%
6. VACANCIES AND BAD DEBTS
The table below provides details of Sycom’s vacancies from March 2010 to September
2012, expressed by area.
Mar-10 Mar-11 Mar-12 Sep-12
Retail vacancy 1.70% 1.70% 2.2% 2.2%
Office vacancy 10.20% 11.70% 5.1% 3.7%
Total vacancy 5.90% 6.60% 3.7% 2.9%
The impairment provision at 30 September 2012 decreased to R529,000 from
R1.242m at 31 March 2012. Bad debts written off for the six months amounted to
R696,000 or 0.24% of rental income for the period. These positive results reflect the
level of attention that has been focused on the management of debtors balances over
the last three years.
7. UNIT HOLDER SUMMARY
Sycom’s major unit holders at 30 September 2012 are shown below, with a
comparison to 31 March 2012.
Major unitholders
30-Sept- 31-Mar-
2012 2012
Hyprop 33.9% 33.9%
Acucap 17.2% 17.2%
Stanlib 5.2% 5.2%
GEPF 4.8% 4.8%
Investec Asset 4.6% 5.9%
Management
65.7% 67.0%
8. PROSPECTS
The board reaffirms the guidance issued in Sycom’s March 2012 results
announcement, and expects distribution growth in the order of 5% for the full year
ended 31 March 2013. Taking into account first half distribution growth of 4.2%, the
board expects distributions to increase by just under 6% in the second half of the
current financial year compared to the same period in the prior 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 55 in respect of the
six months to 30 September 2012. The interim distribution of 84.43 (eighty four
comma four three) cents per unit has been approved in respect of the six month
period ended 30 September 2012. The last date to trade the units cum distribution is
Friday, 30 November 2012 and the record date will be Friday, 7 December 2012. The
units will start trading ex-distribution from Monday, 3 December 2012. Distributions
will be made to unit holders on Monday, 10 December 2012.
Unit certificates may not be dematerialised or rematerialised between Monday, 3
December 2012 and Friday, 7 December 2012 both days inclusive.
On behalf of the Board
GK EVERINGHAM PA THEODOSIOU
Chairman CEO
Sycom Property Fund Managers Ltd Sycom Property Fund Managers Ltd
15 November 2012
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), MS Moloko (Deputy Chairman), FM Berkeley, JPD
Flanagan, BM Stocks, GR Jones*, CB Marlow*, PA Theodosiou*# (CEO),
* Executive , # British
Company Secretary: HHO Steyn
Date: 15/11/2012 07:19:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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