Wrap Text
Interim Results 2012
SYNERGY INCOME FUND LIMITED
(formerly Capital Land Retail 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
("Synergy" or the "Fund")
INTERIM RESULTS 2012
Highlights
- Distributions to A linked unitholders of 40.32 cents per unit
- Distributions to B linked unitholders of 24.75 cents per unit
- 31% growth in distributions to B linked unitholders
- 48% acquisitive growth in assets from R1.171 billion to R1.738 billion
- 87% growth in market capitalisation to R1.2 billion
- Reduction in retail vacancies from 4.6% to 3.4%
- Increase in national tenant ratio from 81.1% to 85.4%
- Completion and transfer in respect of Gugulethu Square and Setsing Crescent acquisitions
Condensed statement of comprehensive income
Unaudited Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2012 2011 2012
R R R
REVENUE
Property portfolio 114 069 485 8 198 590 53 062 853
Recoveries and contractual rental revenue 111 941 552 7 564 978 48 345 736
Straight-line rental income accrual 2 127 933 633 612 4 717 117
Rental revenue 114 069 485 8 198 590 53 062 853
Property operating costs (41 376 428) (2 557 946) (15 406 778)
Administration costs (6 210 353) (1 845 678) (4 746 371)
Net operating profit 66 482 704 3 794 966 32 909 704
Changes in fair values of investment property 26 230 076 32 143 979 153 134 246
Adjustment resulting from straight-lining of rental revenue (2 127 933) (633 612) (4 717 117)
Changes in fair value of swaps (2 895 984) (4 595 141)
Profit from operations 87 688 863 35 305 333 176 731 692
Non-recurring capital-raising expenses (2 500 954) (8 799 307) (10 744 308)
Net finance (expense)/income (19 188 713) 3 828 717 2 520 789
Finance income 1 101 328 5 377 617 8 799 045
Finance costs (23 924 600) (1 548 900) (6 126 456)
Interest received on linked units issued cum distribution 3 884 150
Amortisation of loan-raising costs (249 591) (151 800)
Profit before debenture interest and taxation 65 999 196 30 334 743 168 508 173
Debenture interest (45 415 650) (6 990 071) (30 865 174)
Profit before taxation 20 583 546 23 344 672 137 642 999
Taxation (4 351 340) (6 053 464) (28 140 834)
Profit for the period attributable to Synergy shareholders 16 232 206 17 291 208 109 502 165
Total comprehensive income for the period 16 232 206 17 291 208 109 502 165
Reconciliation of earnings, headline earnings
and distributable earnings
Profit for the period attributable to Synergy shareholders 16 232 206 17 291 208 109 502 165
Debenture interest 45 415 650 6 990 071 30 865 174
Basic earnings attributable to linked unitholders 61 647 856 24 281 279 140 367 339
Changes in fair values of investment properties (net of deferred
taxation) (19 210 759) (25 456 903) (119 419 393)
Changes in fair value of investment properties (24 102 143) 31 510 367 (148 417 129)
Deferred taxation 4 891 384 (6 053 464) 28 997 736
Headline profit to linked unitholders 42 437 097 (1 175 624) 20 947 946
Listing expenses 2 500 954 8 799 307 10 744 308
Amortisation of loan-raising costs 249 591 151 800
Straight-line rental income accrual (2 127 933) (633 612) (4 717 117)
Changes in fair value of swaps (net of deferred taxation) 2 355 941 3 738 239
Changes in fair value of swaps 2 895 984 4 595 141
Deferred taxation (540 043) (856 902)
Distributable earnings 45 415 650 6 990 071 30 865 176
Distribution for the period 45 415 650 6 990 071 30 865 176
Distributed to A linked units 970 826 11 006 010
Distributed to B linked units 6 019 245 19 859 166
To be distributed to A linked units* 19 092 171
To be distributed to B linked units* 26 323 479
Total distributions 45 415 650 6 990 071 30 865 176
Actual number of A linked units in issue 47 352 203 24 889 156 24 889 156
Actual number of B linked units in issue 106 352 670 73 113 070 73 113 070
Weighted number of A linked units in issue 42 102 687 2 434 809 13 600 632
Weighted number of B linked units in issue 98 584 720 53 340 548 63 101 129
Earnings per A share (cents) 11.54 31.00 142.76
Earnings per A linked unit (cents) 56.88 70.87 223.69
Earnings per B share (cents) 11.54 31.00 142.76
Earnings per B linked unit (cents) 38.24 42.29 174.2
Headline loss per A share (cents) (2.12) (14.64) (12.93)
Headline earnings per A linked unit (cents) 43.23 25.23 67.99
Headline loss per B share (cents) (2.12) (14.64) (12.93)
Headline earnings/(loss) per B linked unit (cents) 24.58 (3.36) 18.54
Distribution per A linked unit paid (cents) 3.90 44.22
Distribution per A linked unit payable (cents) 40.32
Distribution per B linked unit paid (cents) 0.6046 19.53
Prelisting distribution per B linked unit paid (cents) 9.30 9.30
Distribution per B linked unit payable (cents) 24.75
* This amount will be distributed on 25 March 2013.
The Fund has no dilutionary instruments in issue.
Condensed statement of financial position
Unaudited Reviewed Audited
As at As at As at
31 December 31 December 30 June
2012 2011 2012
R R R
ASSETS
Non-current assets 1 738 146 021 368 624 168 1 171 300 000
Investment property 1 738 146 021 367 800 000 1 171 300 000
Fair value of property portfolio for accounting purposes 1 731 300 971 367 166 388 1 166 582 883
Straight-line rental income accrual 6 845 050 633 612 4 717 117
Other financial assets 815 243
Property, plant and equipment 8 925
Current assets 18 298 604 241 481 139 12 977 115
Tenant and related receivables 6 934 910 1 109 887 898 053
Trade and other receivables 3 468 725 2 944 788 7 921 350
Cash and cash equivalents 7 894 969 237 426 464 4 157 713
Total assets 1 756 444 625 610 105 307 1 184 277 115
EQUITY AND LIABILITIES
Stated capital and reserves 127 271 420 18 271 230 110 482 187
Stated capital 1 537 049 980 022 980 022
Reserves 125 734 371 17 291 208 109 502 165
Non-current liabilities 1 562 307 999 587 865 139 1 038 220 654
Debenture capital 952 971 381 581 412 553 581 412 553
Interest-bearing liabilities 569 353 318 399 122 424 072 126
Interest rate swap 7 491 125 4 595 141
Deferred taxation 32 492 175 6 053 464 28 140 834
Current liabilities 66 865 206 3 968 938 35 574 274
Trade and other payables 21 449 556 2 556 098 10 286 330
Debenture interest payable 45 415 650 1 412 840 25 287 944
Total equity and liabilities 1 756 444 625 610 105 307 1 184 277 115
Net asset value per combined linked unit* 7.03 6.12 7.06
Net asset value per A linked unit*^ 10.38 8.76 8.79
Net asset value per B linked unit* 5.54 5.22 6.47
* Net asset value includes total equity attributable to equity holders and linked debentures.
^ 60-day volume weighted average trading price at 31 December 2012, limited to combined net asset value, in accordance with the
provisions of the company's Debenture Trust Deed.
Condensed statement of changes in equity
Unaudited Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2012 2011 2012
R R R
Balance at the beginning of the period 110 482 187 127 031 127 031
Repurchase of shares (70) (70)
Issue of linked units 557 027 853 061 853 061
Total comprehensive income for the period 16 232 206 17 291 208 109 502 165
Total stated capital and reserves 127 271 420 18 271 230 110 482 187
Condensed statement of cash flows
Unaudited Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2012 2011 2012
R R R
Cash flows from operating activities
Cash generated from operations 71 432 811 (6 127 896) 19 249 653
Interest income 4 985 478 5 377 617 8 799 045
Interest paid (49 212 543 (7 126 131) (11 855 486)
Net cash inflow from operating activities 27 205 746 (7 876 410) 16 193 212
Net cash outflow from investing activities (540 615 945) (336 298 816) (1 018 165 754)
Net cash inflow from financing activities 517 147 455 518 455 216 942 983 781
Net movement in cash and cash equivalents 3 737 256 174 279 990 (58 988 761)
Cash and cash equivalents at the beginning of the period 4 157 713 63 146 474 63 146 474
Cash and cash equivalents at the end of the period 7 894 969 237 426 464 4 157 713
Commentary
Profile
Synergy is a specialised retail property fund with a specific
focus on medium-sized community and small regional
shopping centres located in high-growth nodes and an
emphasis on commuter-oriented centres located in township
areas and rural towns.
Financial results
Synergy's board of directors is pleased to announce
a distribution of 40.32 cents per A linked unit and
24.75 cents per B linked unit for the six months ended
31 December 2012. The distribution to B linked unitholders
represents an increase of 31% over the B distribution for
the previous six month period ended 30 June 2012 and an
increase of 150% over the B distribution for the corresponding
interim period ended 31 December 2011.
The results for the six months ended 31 December 2012
account for fourteen properties as against four properties at
31 December 2011 and twelve properties at 30 June 2012.
The Setsing Crescent Shopping Centre ("Setsing Crescent")
and the Gugulethu Square Shopping Centre ("Gugulethu
Square") were brought onto Synergy's statement of financial
position at the end of August 2012. These acquisitions,
together with some minor capital expenditure, have led to an
increase in Synergy's property portfolio from R1.171 billion at
30 June 2012 to R1.738 billion at 31 December 2012.
Synergy completed a vendor consideration placement to
partially fund the acquisitions of Gugulethu Square and Setsing
Crescent which raised R376 million. The additional linked
units were listed on the JSE on 13 August 2012 bringing the
total linked units in issue to 47.4 million A linked units and
106.4 million B linked units.
Operational performance
Vacancy ratios of retail lettable area (which comprises 96%
of gross lettable area ("GLA")) on the full Synergy portfolio
were reduced from 4.6% at 30 June 2012 to 3.4% at
31 December 2012. This represents a 1.2% improvement
since June 2012. Rental reversions across the portfolio have
trended upwards by 7.1% driven by direct, active management
of the leasing function and a proactive leasing strategy targeting
the under-let components of the portfolio.
Of current retail vacancies, 1.6% are planned vacancies at
Highland Mews Shopping Centre, Ermelo Game Shopping
Centre and Richdens Village Shopping Centre, which are
earmarked for refurbishment and redevelopment.
The weighted lease expiry for the Synergy retail portfolio is
3.1 years. The majority of leases expiring in 2013 relate to
the fifth anniversary from opening of Setsing Crescent (98%
occupied) and King Senzangakhona Shopping Centre (99%
occupied) and are predominantly national tenancies. Given the
strong demand for space at both of these centres, renewal
discussions have commenced and it is anticipated that these
tenants will renew.
Improvement in the overall tenant mix is a key focus area.
Since June 2012, the ratio of national tenants in the portfolio
has increased from 81.1% to 85.4% by GLA. Synergy's target
national tenant ratio is 85.0% or higher.
The total expense to income ratio of 25.2% is considered
reasonable and is in line with industry standards. Synergy
continues to target reductions in this ratio.
Property portfolio
Synergy's property portfolio currently comprises
14 properties in South Africa with a total GLA of 176 690 m2
and a market value of R1.738 billion as at 31 December 2012.
The following properties were acquired during the six months ended 31 December 2012:
Latest
GLA Effective date of valuation
Property Location m2 transfer R
Setsing Crescent Shopping Centre Phuthaditjhaba, Free State 21 542 23 August 2012 257 000 000
Gugulethu Square Shopping Centre Gugulethu, Western Cape 25 338 30 August 2012 308 000 000
Total acquisitions 46 880 565 000 000
Gugulethu Square and Setsing Crescent transferred to Synergy in August 2012. These two properties were externally valued as at
1 April 2012 at R565 million by an independent valuer, Mills Fitchet Magnus Penny (Proprietary) Limited.The balance of the portfolio
is carried at the 30 June 2012 valuation plus minor capital expenditure, which is considered to be a reasonable approximation of
the 31 December 2012 values. The recognition of Gugulethu Square and Setsing Crescent at fair value on acquisition resulted in
a fair value gain of R26.2 million during the six months ended 31 December 2012.
Synergy's property portfolio is geographically diverse with properties situated in Gauteng, KwaZulu-Natal, North West, Western
Cape, Limpopo, Mpumalanga and Free State as illustrated graphically below.
Borrowings
Synergy has loan facilities in place with Standard Bank, Nedbank
and Rand Merchant Bank of R745 million, in aggregate.
The fund had total borrowings of R567.5 million at
31 December 2012 excluding capitalised interest and loan-
raising costs held at amortised cost. At the end of December
2012, interest rates were hedged on 73% of total borrowings
at a weighted average rate of 9.11% with a weighted average
maturity of 3.96 years. Synergy's average cost of borrowings at
31 December 2012 was 8.71%. The loan to value ratio of the
fund at 31 December 2012 was 32.7% based on investment
properties valued at R1.738 billion. At 31 December 2012,
Synergy had unutilised long-term facilities of R177.5 million.
Prospects
The Synergy property portfolio continues to perform in line
with projections made at the time of acquisition of Gugulethu
Square and Setsing Crescent. Executive management's
attention continues to be focused on improving performance
through implementation of robust operational strategies,
processes and controls. Growth opportunities through
strategic value-enhancing acquisitions are continually assessed.
The forecast distributions for Synergy's A and B linked units
for the 2013 and 2014 financial years, remain achievable. All
assumptions, notes, explanatory statements and guidance to
the forecasts are as stated in the announcements released
on SENS on 6 June 2012 and 31 July 2012, respectively,
and remain unchanged. The forecast information has been
reported on by the independent reporting accountants,
Moore Stephens BKV Inc.
Payment of interim distributions
Notice is hereby given that the board of directors has declared an interim distribution of 40.32 cents per A linked unit and
24.75 cents per B linked unit for the six months ended 31 December 2012. 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 dividend withholding tax.
The salient dates for the distributions will be as follows:
2013
Last day to trade cum distribution Thursday, 14 March
Linked units trade ex distribution Friday, 15 March
Record date Friday, 22 March
Payment date Monday, 25 March
Linked unitholders may not dematerialise or rematerialise
their linked units between Friday, 15 March 2013 and Friday,
22 March 2013 both days inclusive.
Preparation and accounting policies
These interim results for the six months ended
31 December 2012 have not been audited or reviewed by the
company's independent auditors, Moore Stephens BKV Inc.
The financial statements have been prepared in accordance
with the measurement and recognition requirements of
International Financial Reporting Standards ("IFRS"), the
AC 500 series issued by the Accounting Practices Board or its
successor, IAS 34 Interim Financial Reporting, the JSE Listings
Requirements and the requirements of the South African
Companies Act, 2008.
This report was compiled under the supervision of Uys Meyer
BAcc (Hons), the Financial Director.
The accounting policies adopted are consistent with those
applied in the prior periods.
The directors are not aware of any matters or circumstances
arising subsequent to 31 December 2012 that require any
additional disclosure or adjustment to the interim financial
statements and which are not disclosed in this announcement.
By order of the board
Synergy Income Fund Limited
Cape Town
28 February 2013
Directors: M Kuscus* (Chairperson), W Brooks (CEO), U Meyer (FD), S Segar*, M Mdlolo^, A Ramsden*, L Mtumtum*
*Independent non-executive, ^Non-executive
Registered office: 3rd Floor, 200 on Main, Cnr Main and Bowwood Roads, Claremont, 7708
Transfer secretaries: Computershare Investor Services (Proprietary) Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051,
Marshalltown, 2107)
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: 28/02/2013 04:00:00 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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