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Synergy Income Fund Ltd FY 2013 results

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Synergy Income Fund Ltd FY 2013 results

Synergy Income Fund Ltd FY 2013 results

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  • 1. www.synergyincomefund.com SUMMARISED AUDITED FINANCIAL STATEMENTS for the year ended 30 June 2013
  • 2. Condensed statement of comprehensive income  Audited Year ended 30 June 2013 R REVENUE Property portfolio Recoveries and contractual rental revenue Straight-line rental income accrual Rental revenue Property operating costs Administration costs Net operating profit Fair value adjustments Changes in fair values of investment property Adjustment resulting from straight-lining of rental revenue Changes in fair value of swaps Profit from operations Non-recurring capital raising expenses Net finance (expense)/ income Finance income Finance costs Interest received on linked units issued cum distribution Amortisation of loan raising costs Profit before debenture interest and taxation Debenture interest Profit before taxation Taxation Profit for the period attributable to Synergy shareholders Total comprehensive income for the year Reconciliation of earnings, headline earnings and distributable earnings Profit for the period attributable to Synergy shareholders Debenture interest Basic earnings attributable to linked unitholders Changes in fair values of investment properties (net of deferred taxation) Changes in fair value of investment properties Deferred taxation Headline profit to linked unitholders Non-recurring capital raising expenses Amortisation of loan raising costs Straight-line rental income accrual Changes in fair value of swaps (net of deferred taxation) Changes in fair value of swaps Deferred taxation Distributable earnings Distribution for the period Distributed to A linked units Distributed to B linked units To be distributed to A linked units* To be distributed to B linked units* Total distributions Actual number of A linked units in issue Actual number of B linked units in issue Weighted number of A linked units in issue Weighted number of B linked units in issue Earnings per A share (cents) Earnings per A linked unit (cents) Earnings per B share (cents) Earnings per B linked unit (cents) Headline earnings/(loss) per A share (cents) Headline earnings per A linked unit (cents) Headline earnings/(loss) per B share (cents) Headline earnings per B linked unit (cents) Distribution per A linked unit paid (cents) Distribution per A linked unit payable (cents) Distribution per B linked unit paid (cents) Pre-listing distribution per B linked unit paid (cents) Distribution per B linked unit payable (cents) * This amount will be distributed on 23 September 2013. The Fund has no dilutionary instruments in issue. Audited Year ended 30 June 2012 R 253 366 497 240 010 489 13 356 008 253 366 497 (90 732 526) (12 875 626) 149 758 345 149 862 250 160 657 440 (13 356 008) 2 560 818 299 620 595 (2 500 954) (43 110 632) 1 597 227 (48 096 897) 3 884 150 (495 112) 254 009 009 (93 786 818) 160 222 191 28 520 195 188 742 386 188 742 386 53 062 853 48 345 736 4 717 117 53 062 853 (15 406 778) (4 746 371) 32 909 704 143 821 989 153 134 246 (4 717 117) (4 595 141) 176 731 692 (10 744 308) 2 520 789 8 799 045 (6 126 456) – (151 800) 168 508 173 (30 865 174) 137 642 999 (28 140 834) 109 502 165 109 502 165 188 742 386 93 786 818 282 529 204 (176 299 168) (147 301 432) (28 997 736) 106 230 036 2 500 954 495 112 (13 356 008) (2 083 276) (2 560 818) 477 542 93 786 818 93 786 818 19 092 408 26 322 286 20 048 923 28 323 201 93 786 818 47 352 203 106 352 670 44 705 871 102 436 772 128,27 215,82 128,27 181,62 8,46 96,01 8,46 61,80 40,32 42,34 24,75 – 26,63 109 502 165 30 865 174 140 367 339 (119 419 393) (148 417 129) 28 997 736 20 947 946 10 744 308 151 800 (4 717 117) 3 738 239 4 595 141 (856 902) 30 865 176 30 865 176 11 006 010 19 859 166 – – 30 865 176 24 889 156 73 113 070 13 600 632 63 101 129 142,76 223,69 142,76 174,24 (12,93) 67,99 (12,93) 18,54 44,22 – 19,53 9,30 –
  • 3. Condensed statement of financial position  ASSETS Non-current assets Investment property Fair value of property portfolio for accounting purposes Straight-line rental income accrual Deferred taxation Current assets Trade and other receivables Cash and cash equivalents Total assets EQUITY AND LIABILITIES Stated capital and reserves Stated capital Reserves Non-current liabilities Debenture capital Interest-bearing liabilities Derivative financial instruments Deferred taxation Current liabilities Trade and other payables Debenture interest payable Total equity and liabilities Net asset value per linked unit * Net asset value per A linked unit * ^ Net asset value per B linked unit * Audited Year ended 30 June 2013 R Audited Year ended 30 June 2012 R 1 877 453 361 1 877 074 000 1 859 000 875 18 073 125 379 361 29 293 927 23 989 593 5 304 334 1 906 747 288 1 171 300 000 1 171 300 000 1 166 582 883 4 717 117 – 12 977 115 8 819 402 4 157 713 1 184 277 115 299 781 600 1 537 049 298 244 551 1 525 892 224 952 971 381 570 886 520 2 034 323 – 81 073 464 32 701 340 48 372 124 1 906 747 288 8,15 11,58 6,62 110 482 187 980 022 109 502 165 1 038 220 654 581 412 553 424 072 126 4 595 141 28 140 834 35 574 274 10 286 330 25 287 944 1 184 277 115 7,06 8,79 6,47 * Net asset value includes total equity attributable to equity holders and linked debentures. ^  0-day volume weighted average trading price at 30 June 2013, limited to combined net asset value, in accordance with the provisions of 6 the Fund’s debenture trust deed. Condensed statement of changes in equity  Balance at the beginning of the year Repurchase of shares Issue of linked units Total comprehensive income for the year Total stated capital and reserves Condensed statement of cash flows  Cash flows from operating activities Cash generated from operations Interest income Interest paid Net cash inflow from operating activities Net cash outflow from investing activities Net cash inflow from financing activities Net movement in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Audited Year ended 30 June 2013 R 110 482 187 – 557 027 188 742 386 299 781 600 Audited Year ended 30 June 2012 R 127 031 (70) 853 061 109 502 165 110 482 187 Audited Year ended 30 June 2013 R Audited Year ended 30 June 2012 R 141 146 202 5 481 377 (118 799 535) 27 828 044 (545 116 560) 518 435 137 1 146 621 4 157 713 5 304 334 19 249 653 8 799 045 (11 855 486) 16 193 212 (1 018 165 754) 942 983 781 (58 988 761) 63 146 474 4 157 713
  • 4. Highlights Year on year • Distributions to A linked unitholders of 82.66 cents per unit • Distributions to B linked unitholders of 51.38 cents per unit 5% • NAV 15% 78% per combined linked unit of R8.15 at 30 June 2013 • Investment property valued at R1.877 billion • Market capitalisation of R1.261 billion • Reduction in retail vacancies from 4.6% to 3.3% • Increase in national tenant ratio from 81% to 86% 60% R628 million 1.3% improvement 5% improvement COMMENTARY 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 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. Lease expiry profile by % retail GLA 45 000 40 000 35 000 30 000 25 000 20 000 15 000 10 000 5 000 – 25 23.1 18.1 15.3 9.3 5.9 3.3 June 2017 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. 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%. June 2018+ 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. 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. June 2016 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. 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. June 2015 Synergy listed on the Main Board of the Johannesburg Stock Exchange (“JSE”) on 14 December 2011. Operational performance Monthly Listing on the JSE, unit structure, unit placement and REIT status 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. June 2014 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. the forecasts communicated to investors on SENS on 6 June 2012 and 31 July 2012, respectively. Vacant Synergy Income Fund Limited (“Synergy” or “the Fund”) is a specialised retail property fund with a specific focus on mediumsized 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. GLA (m2) Profile
  • 5. 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: Property Location GLA m2 Effective date of transfer Latest valuation 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 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 illustrated graphically below. Geographical profile by GLA Gauteng 11% 12% KZN 11% North West 25% 9% Western Cape Limpopo 26% 6% Mpumalanga Free State 598 653 000 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.. New developments and upgrades Payment of final distributions 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, KwaZuluNatal 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. 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. Borrowings The salient dates for the final distributions will be as follows: 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 The interest distributions are not subject to withholdings tax. 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
  • 6. 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:  Kuscus* (Chairperson), W Brooks(CEO), A Raubenheimer (FD), U Meyer^, S Segar*, M Mdlolo^, A Ramsden*, M 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 (Incorporated in the Republic of South Africa) (Registration number 2007/032604/06) www.synergyincomefund.com JSE share code for A linked units “SGA” JSE share code for B linked units “SGB” ISIN ZAE000161550 ISIN ZAE000162293 (Approved as a REIT by the JSE) (“Synergy” or “the Fund”) Managed by Capital Land Asset Management Proprietary Limited