Sycom Property Fund HY 2014 results

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Sycom Property Fund HY 2014 results

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Sycom Property Fund HY 2014 results

  1. 1. Condensed STATEMENT OF CASH FLOWS for the 6 months ended 30 September 2013 Reviewed at 30 Sep 2013 COMMENTARY Unaudited at 30 Sep 2012 (R ’000) Audited at 31 Mar 2013 (R ’000) 1. REVIEW OF RESULTS AND OPERATIONS The period under review has been one of significant acquisition, disposal and redevelopment activity for the Fund, in line with the board’s policy of continuously improving the portfolio and enhancing its income growth potential. An undivided half share was acquired in the Greenacres Shopping Centre, one of the Eastern Cape’s premier retail properties, and a significant expansion and redevelopment of Vaal Mall was approved, to commence in the early part of 2014. These two activities will add close to R1bn to the value of the Fund’s retail portfolio. There were also two strategic disposals, the first being Sycom’s minority stakes in Southgate Mall and Value Mart (concluded shortly after the period end) and the second being the sale of the Discovery building in Sandton. The board of Sycom Property Fund Managers Limited (‘SPFM’) reports a distribution of 88.12 cents per unit (cpu) for the six months ended 30 September 2013, an increase of 4.4% over the comparative period last year. With distribution growth of over 7% 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 2014. Retail portfolio Sycom’s South African retail portfolio continued to show good underlying growth, with tenants reporting a 5% increase in their turnovers for the 12 months to 30 September 2013 compared to the same period in the previous year. N1 City and Vaal Mall were again the top performers in terms of growth, delivering reported growth in tenant turnovers of 7.7% and 5.3% respectively. During the period under review, leases totalling 8,550m² terminated at an average rental of R201.72/m². Leases totalling 7,192m² were concluded at an average rental of R228.03/m² a 13% upward reversion. Expiries in the remaining six months of the 2014 financial year will amount to 12,287m², terminating at an average rental of R194.09/m². These leases are expected to be renewed at an average rate of R202/m², representing a 4.1% positive reversion. Office portfolio Demand for “A” grade offices remained soft during the period under review, with the vacancy rate increasing from 3.1% at 31 March 2013 to 4.9% at the end of September 2013. Leases were concluded on 13,844m² of GLA during the period, at an average gross rate of R141.02/m². This was 6.6% lower than the average gross terminating rental of R150.97/m² on the 20,311m² which terminated over this period. (R ’000) Cash utilised in operating activities Cash generated from operations * 279 104 33 144 833 6 860 Dividend received ** 296 620 7 654 Distribution paid ( 255 155) (212 833) ( 422 730) Interest paid ( 80 226) ( 39 037) ( 27 462 24 612 36 825 - - Interest received 82 399) A Collective Investment Scheme in Property registered in terms of the Collective Investment Schemes Control Act, No 45 of 2002 and managed by Sycom Property Fund Managers Limited (Registration number 1986/002756/06) (“Sycom” or “the fund”). Tax paid ( 556) Net cash utilised in operating activities ( 28 538) (187 254) ( 164 030) JSE SHARE CODE: SYC Cash flows utilised in investing activities (114 089) (1 513 861) ISIN NO: ZAE 000019303 Subsequent expenditure on investment properties Reviewed CONDENSED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013 Unaudited six months to 30 Sep 2012 (R ’000) 1 017) ( 10 885) Subscription to Rights Issue Audited twelve months to 31 Mar 2013 (R ’000) 9 868) ( Revenue 369 413 297 992 286 772 621 425 2 123 11 220 ( 64 969) ( (179 058) (1 578 828) 64 967) Cash flows from financing activities 29 927 Gross proceeds from the issue of units in May 2013 900 000 - - - - 29 476 86 324 1 067 342 Net cash inflow from financing activities 918 359 86 324 1 067 342 878 936 (279 988) 206 745 882 055 Unit issue costs ( Increase in borrowings 11 117) 651 352 367 290 - Net increase/(decrease) in cash and cash equivalents (R ’000) Contractual rental revenue and recoveries - - Net cash outflow from investing activities CONDENSED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the 6 months ended 30 September 2013 Reviewed six months to 30 Sep 2013 ( Subsequent expenditure on investment properties held for sale Straight-lining of rental revenue adjustment Direct property operating expenses ( 72 972) Selling costs on investment properties held for sale ( ( 52 734) ( 109 791) - Net rental and related revenue 292 325 245 258 541 561 9 655 7 581 15 961 Fair value adjustments to investment properties and listed investment 301 262 ( 35 247) 721 507 Fair value gain/(loss) on investment properties 250 897 ( 11 220) 719 667 50 365 ( 24 027) 1 840 Fair value gain/(loss) on listed investment Administrative expenses ( 23 452) ( 17 946) ( 38 429) Service charge ( 21 347) ( 17 013) ( 37 178) Other administrative expenses ( ( ( Profit before net finance costs 2 105) 933) 579 790 ( 51 869) Net finance costs 199 646 ( 14 890) Interest income 26 787 1 251) 1 240 600 ( 24 612 60 227) 37 500 Interest expense ( 68 639) ( 38 388) ( 91 537) Net change in fair value of derivative financial instruments at fair value through profit and loss ( 10 017) ( ( 6 190) Profit before taxation 527 921 Taxation ( Profit for the period 2. ACQUISITIONS, EXPANSIONS AND DISPOSALS Greenacres acquisition On 21 October 2013 Sycom and Acucap announced the joint acquisition of the Greenacres Shopping Centre for R1.016bn, at an initial yield of 7.7%. Each of the two funds acquired an undivided 50% share in Greenacres for R508m. With a Gross Lettable Area (GLA) of 40,767m², Greenacres is one of three retail properties that together comprise a single combined shopping mall of 89,529m² GLA, the other two properties being The Bridge @ Greenacres (44,062m² GLA) in which Acucap owns 27.5% and a stand-alone Woolworths store that is owned by Woolworths (4,700m² GLA). With a major mall upgrade and planned extensions of over 12,000m² at Greenacres itself, the combined mall will expand to over 100,000m², reinforcing its status as one of the Eastern Cape’s premier retail products. Good trading density, supported by over one million shoppers per month, has resulted in strong interest from all the major fashion retailers at Greenacres to either expand their stores or introduce new brands. Plans will also be developed to upgrade the mall and offer a contemporary, easier and more pleasant shopping experience. The acquisition will be funded with debt facilities that Sycom has in place, at an average cost of 7.6%. After the Greenacres acquisition, Sycom will have a gearing ratio of just under 33%. 882 055 - 4 116) 1 114) 184 756 1 180 373 - 556) ( 96) 527 365 184 756 1 180 277 Net change in fair value of cash flow hedges* 34 881 - Other comprehensive income for the period 34 881 - 562 246 184 756 1 180 277 Basic and diluted earnings per unit – cents 194,48 74,32 474,76 ( 1 086 144 42) 206 602 025 206 745 * The comparative figures include investment property acquisitions accrued for at 31 March 2012 and paid on transfer date. ** 90% of the dividend income relating to the dividend due at 31 March 2013 from Stenham European Shopping Centre Fund was received in the form of scrip shares. The dividend declared by Stenham for the six months ended 30 September 2013 was still receivable at the period end. NOTES 1. BASIS OF PREPARATION AND REVIEW OPINION The condensed consolidated interim financial statements are prepared and presented in accordance with International Financial Reporting Standards, which include International Accounting Standard (IAS) 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and the requirements of the Collective Investment Schemes Control Act, 2002. The same accounting policies and methods of computation are followed in the interim financial report as compared to the most recent annual financial statements except for the adoption of the newly effective standards as described below. The key estimates and assumptions used in the interim financial statements are the same as the ones used in the annual financial statements. The condensed consolidated results have been prepared under the supervision of the group’s financial director, Baden Marlow. The following standards are being applied for the first time as they became effective during the current period: IFRS 10 - Consolidated Financial Statements IFRS 11 - Joint Arrangements IFRS 12 - Disclosure of Interests in Other Entities IFRS 13 - Fair value measurement The condensed consolidated financial statements of Sycom Property Fund for the six months ended 30 September 2013 have been reviewed by the company’s auditor, KPMG Inc. In their review report dated 14 November 2013, which is available for inspection at Sycom’s Registered Office, KPMG Inc state that their review was conducted in accordance with the International Standard on Review Engagements 2410, Review of Interim Information Performed by the Independent Auditor of the Entity, and have expressed an unmodified conclusion on the condensed consolidated interim financial statements. - Total comprehensive income for the period 463 Cash and cash equivalents at the end of the period - *The fair value movement on the cash flow hedges through other comprehensive income may be reclassified to profit and loss. 527 365 Fair value adjustment to investment properties 184 756 ( 250 897) Taxation 1 180 277 11 220 ( 719 571) 556 Selling costs on investment properties held for sale - - 277 024 Headline earnings 195 976 460 706 4 116 Straight-line rental income accrual ( - 2 123) - ( 11 220) Segment revenue ( 29 927) Offices (R ’000) 167 916 199 374 Straight-line rental income accrual 1 540 583 Dividend income 9 655 Hyprop transaction and Somerset Mall The Hyprop transaction was successfully concluded on the effective date of 1 October 2013, in terms of which Somerset Mall was transferred to Hyprop in exchange for the tendering of 81.5m units in Sycom. These units have been cancelled, with the result that Hyprop’s interest in Sycom reduces to 1.4% and Acucap’s holding increases to 33.5%, as more fully reflected in section 6 below. Discovery Building disposal Prior to the half year end, Sycom entered into an agreement with an associate of Zenprop and with Redefine Properties (acting jointly) to dispose of the Discovery building on Fredman Drive, Sandton. The sale price of R413.9m represents a forward yield of 8.15%. The independent valuation of the Discovery building was R408m at 31 March 2013. Discovery Health has committed to relocating to new and much larger offices in Sandton, and the board’s decision to dispose of this building was based on the large single tenant exposure, the short remaining lease tenure and the certainty of the tenant vacating at the end of its lease. Southgate disposal Subsequent to the half year end, an agreement has been entered into with Pareto Limited to dispose of Sycom’s 16.61% interest in Southgate Mall and its 16.01% interest in Southgate Value Mart for a combined sale price of R249.3m, representing a yield of 8.3%. These properties were valued at R230.6m at 31 March 2013. The board’s view was that Sycom’s holding in these two properties was too small to influence the performance of the fund, and since there was no prospect of increasing its stake, the decision was taken to dispose of Sycom’s minority interest. 3. BORROWINGS - Total revenue RECONCILIATION OF PROFIT FOR THE PERIOD TO HEADLINE EARNINGS AND DISTRIBUTABLE EARNINGS Profit for the period Retail (R ’000) 179 111 ( 33 105) ( 39 867) Selling costs on investment properties held for sale ( ( 199 957 Operating expenditure 4 100) Net finance cost 160 822 10 017 Fair value adjustment to listed investment 1 114 ( 50 365) South Africa 112 117 International 50 365 - 304 693 299 602 Segmental earnings 138 780 Prepaid distribution ( 1 840) 9 492 - - 248 161 Distributable earnings 209 897 435 129 Allocated Rental revenue - 2 123 - Basic and diluted earnings per unit – cents 194,48 74,32 474,76 Basic and diluted headline earnings per unit – cents 102,16 78,83 185,32 88,12 84,43 175,03 Distribution per unit – cents ( LTV 66.8% ( 23 452) 1 053 ( 42 905) Net operating income 303 033 ( 66 357) 236 676 Start End effective rate Amount Rm 250 897 - 250 897 17-Mar-14 17-Mar-17 7.29% 200 50 365 - 50 365 31-Mar-14 31-Mar-17 7.29% 200 9-Apr-14 9-Apr-18 7.60% 100 30-Sep-14 30-Sep-17 7.55% 200 Net finance cost Number of units in issue (‘000) 281 632 248 604 248 604 Fair value adjustment to listed investment Number of weighted average units in issue (‘000) 271 164 248 604 248 604 4 116) Fair value adjustment on interest rate and cross currency swaps Reviewed at Unaudited at 31 Mar 2013 (R ’000) (R ’000) ( Forward starting swaps entered into 10 017) 604 295 Audited at 30 Sep 2012 4 116) 41 852) ( ( 76 374) 527 921 31-Mar-15 31-Mar-18 7.81% 300 RETAIL offices 30-Sep-15 30-Sep-18 9.15% 300 31-Mar-16 31-Mar-20 9.65% 100 31-Mar-16 31-Mar-21 9.84% 100 8.15% 1 500 Total 30 Sep 2013 ( ( - Profit before taxation Condensed STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2013 - 96 424) 28.6% Forward starting SWAPS as % of adjusted borrowings 379 068 ( 7 860 751 Fair value adjustment to investment properties Earnings per unit (cents): Selling costs on investment properties held for sale - 368 593 Assets 9 655 379 068 7 492 158 Investment in Stenham 2 123 9 655 72 972) 8 642 158 -1 150 000 less Somerset Mall 367 290 Straight-line rental income accrual ( 2 246 039 Property assets at 30 September 2013 Total Dividend income Total revenue 1 165 000 Adjusted property assets Unallocated 367 290 Operating expenditure 1 081 039 Adjusted borrowings Fair value adjustments 6 190 24 027 -849 245 Net borrowings Acquisition of Somerset Mall Segmental net operating income Reconciliation to profit before taxation in the statement of comprehensive income Unrealised deficit on derivative financial instruments 1 930 284 Cash in Annex account 748 142 211 During the six months under review, Sycom negotiated additional debt facilities of R600m with Rand Merchant Bank, taking its total facilities to R2.9bn, of which R2.25bn has been utilised. This represents a gearing ratio of 29.5%. During the same period, the fund entered into new forward starting swaps for R1.5bn, the effect of which was to increase Sycom’s interest rate hedging to 66.8% of borrowings. After the conclusion of the Somerset Mall transaction referred to in section 2 above, Sycom’s borrowing profile is as follows: Borrowings at 30 September 2013 16) 305 Vaal Mall expansion The R442m redevelopment of Vaal Mall is set to commence in January 2014. Sycom’s share of the capital cost will be R344m, at an expected initial yield of 8.5%. The project will add approximately 22,000m² of GLA, taking Vaal Mall to just over 70,000m², and will include major expansions for Woolworths, Truworths, Edgars and Game, as well as the introduction of cinemas. The anticipated completion date is October 2015. 2. Condensed SEGMENTAL RESULTS for the 6 months ended 30 September 2013 Other comprehensive income for the period In the next six months, leases for 18,192m² will expire at an average gross rental of R135.36/m², and these are expected to be renewed at R140.50/m², representing a 3.8% positive reversion. Cash and cash equivalents at the beginning of the period Effect of exchange fluctuations on cash held Investment income ( 675 516) 10 017) (R ’000) ASSETS Investment property assets 8 642 158 4 175 058 4 467 100 Total 3. Condensed segmental results Property assets 8 642 158 6 228 966 8 378 608 Investment properties and related receivables 7 078 258 6 228 966 Investment properties 6 835 209 6 046 002 8 120 486 213 869 163 298 232 662 29 180 19 666 25 460 for the 6 months ended 30 September 2012 8 378 608 Non-current straight-lining receivable Current straight-lining receivable Retail (R ’000) Segment revenue 155 266 Straight-line rental income accrual 1 563 900 - - Investment properties held for sale 1 546 704 - - Straight-lining receivable 17 196 - - Other non-current assets 403 474 277 794 310 722 Listed investment 368 593 277 698 310 722 34 881 - - 167 208 Deferred taxation - 96 - 1 181 640 676 773 298 019 85 841 67 167 ( 26 623) ( 26 111) 7 581 8 380 1 086 144 602 025 Dividends receivable Total assets 232 10 227 272 7 183 533 8 987 349 South Africa ( ( ( 24 027) 112 671 4 361) 6 859) Allocated Rental revenue 5 937 054 6 707 343 2 579 048 Non-distributable reserves 4 451 872 3 358 006 4 128 295 Non-current liabilities 1 974 463 919 790 1 933 545 Borrowings 1 930 284 919 790 1 900 808 44 179 - 32 737 Current liabilities 372 421 326 689 115 865 79 312 111 409 8 395 37 480 209 897 225 232 10 227 272 7 183 533 8 987 349 2 798 2 388 2 698 Derivative financial instruments Derivative financial intruments Unitholders for distribution Total unitholders’ funds and liabilities Net asset value per unit – cents Condensed statement of changes in unitholders’ funds Capital (R ’000) Balance at 31 March 2012 Nondistributable reserve Retained earnings (R ’000) Total (R ’000) (R ’000) 2 579 048 3 383 147 - 5 962 195 Transactions with owners, recognised directly in equity - - - - Total comprehensive income for the period - - 184 756 184 756 Transfer to non-distributable reserve - Unitholders distribution - - 2 579 048 3 358 006 - 5 937 054 Transactions with owners, recognised directly in equity - - - - Total comprehensive income for the period - - 995 521 995 521 Transfer to non-distributable reserve - Unitholders distribution - Balance at 30 September 2012 Balance at 31 March 2013 2 579 048 ( 25 141) 770 289 - 25 141 ( 209 897) ( 209 897) 4 128 295 - ( 70 680) ( 14 425) - ( 11 117) - - Prepaid distribution to 31 March 2013 ( 29 923) - ( 32 371) Prepaid distribution 2014 period ( 9 492) - ( 29 923) 221 117 34 881 - Net change in fair value of cash flow hedge recognised directly in other comprehensive income - 34 881 - Total comprehensive income for the period - 34 881 527 365 Transfer to non-distributable reserve - 288 696 ( 288 696) Unitholders distribution - - 3 428 516 4 451 872 Balance at 30 September 2013 ( 248 161) - new Sycom units to qualifying unitholders at a subscription price of 2725 cents (R27.25) per Rights Offer unit. Mar-12 1.8% 2.2% 6.0% 3.1% 5.1% 4.9% 2.6% 3.7% 6. UNITHOLDER SUMMARY Fair value adjustment on interest rate and cross currency swaps Profit before taxation 218 241 Total Investment property assets 6 228 966 ( 1 114) ( 33 485) RETAIL ( 1 114) 184 756 A summary of Sycom’s major unitholders at 30 September 2013, adjusted for the cancellation of the Hyprop units in October 2013, is shown below, with a comparison to 31 March 2013. Major unitholders offices 30-Sep-2013 5.2% 6.7% 4.8% 5.6% 3.8% 56.1% • Level 1: Quoted prices (unadjusted) in an active market for an identical instrument. 19.6% 8.9% Government Employees Pension Fund The group measures fair values using the following hierarchy that reflects the significance of the inputs used in making the measurements: 33.9% 33.5% Stanlib 4. FAIR VALUE OF FINANCIAL INSTRUMENTS RECOGNISED IN THE STATEMENT OF FINANCIAL POSITION 1.4% Acucap 2 785 981 31-Mar-2013 Hyprop Old Mutual Investment Group 3 442 985 67.3% 7. PROSPECTS The group uses widely recognised valuation models for determining the fair value of common and more simple financial instruments, like the interest rate and currency swaps that use only observable market data and require little management judgement and estimation. The interest rate swaps and cross currency swap are valued using the Mark to Market valuations, excluding transactions costs, as determined by Nedbank. The investment in Stenham European Shopping Centre Fund (listed investment) is an investment in a closed fund without a quoted price. The significant underlying asset per the statement of financial position of Stenham is the investment property balance, which is valued using observable market data. Sycom’s valuation of Stenham is based on the net asset value of the investment translated at the period end ruling exchange rate. Availability of observable market prices and model inputs reduces the need for management judgement and estimation and also reduces the uncertainty associated with determination of fair values. The table below analyses financial instruments carried at fair value, by valuation method: Level 1 Level 2 Level 3 Total 30 September 2013 The board confirms the guidance issued in Sycom’s March 2013 results announcement, and expects distribution growth in the order of 6% for the full year ending 31 March 2014. Taking into account first half distribution growth of 4.4%, the board expects distributions to increase by just over 7% in the second half of the current financial year compared to the same period last year. For the financial years from 2015 to 2018, the board expects average distribution growth of between 7% and 8%. • Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category also includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments. The above information has not been reviewed or reported on by Sycom’s auditors. 8. PAYMENT OF INTEREST Notice is hereby given of the declaration of distribution number 57 in respect of the six months to 30 September 2013. The interim distribution of 88.12 (eighty eight comma one two) cents per unit has been approved in respect of the six month period ended 30 September 2013. The last date to trade the units cum distribution is Friday, 29 November 2013 and the record date will be Friday, 6 December 2013. The units will start trading ex-distribution from Monday, 2 December 2013. Distributions will be made to unitholders on Monday 9 December 2013. Unit certificates may not be dematerialised or rematerialised between Monday 2 December 2013 and Friday 6 December 2013 both days inclusive. As Sycom has REIT status with the JSE, the distribution will be treated as taxable dividends in the hands of local tax residents and taxable dividends for dividends tax purposes for foreign tax residents from 1 January 2014. This distribution relates to the financial year ending 31 March 2014. Financial assets 34 881 6 707 343 Financial liability - ( 52 574) - ( 52 574) 858 960 900 000 ( 11 117) - ( 29 923) 34 881 34 881 562 246 ( 248 161) 7 880 388 *Sycom undertook a fully underwritten renounceable Rights Offer in May 2013 whereby R 900 000 002 was raised by way of the issue of 33 027 523 Mar-13 3.0% ( 24 027) On behalf of the Board 30 September 2012 Financial assets Listed investment - 277 698 - 277 698 - ( 37 480) - ( 37 480) Financial liability Cross currency and interest rate swaps 5. INVESTMENT PROPERTY HELD FOR SALE The following investment properties have been classified as held for sale at 30 September 2013: - The table below provides details of Sycom’s vacancies from March 2012 to September 2013, expressed by area. 368 593 527 365 Other comprehensive income for the period 8.9% The relatively high office expiry percentage in the year ending March 2017 is due to the expiry of the Deloitte lease in Woodlands. Negotiations are already under way with Deloitte to substantially re-work their office space and extend this lease. There are no other individually significant expiries in Sycom’s portfolio. - - - 527 365 9.6% ( 24 027) - 9 492 - 36.6% Fair value adjustment to listed investment 34 881 - - 22.0% ( 11 220) 368 593 Total comprehensive income for the period Profit for the period 13.3% - - 29 923 Payment of prepaid distribution in July 2013 9.6% ( 11 220) - - Capitalised unit issue costs 3.2% 100.0% The impairment provision at 30 September 2013 increased by R600 000 to R1.88m from R1.28m at 31 March 2013. Bad debts written off for the six months amounted to R470 000 compared to R1.25m for the year ended 31 March 2013. The board does not expect any abnormal provisions or write offs. ( 13 776) 253 488 Net operating income ( 17 946) 649 Interest rate swaps 9 492 900 000 Proceeds - 3.2% Fair value adjustment to investment properties Cross currency and interest rate swaps 849 468 10.1% 305 573 Listed investment - Transactions with owners, recognised directly in equity Issue of 33 027 523 units in May 2013* 11.4% The increase in the retail vacancy is concentrated in the upper level at Fourways Crossing and at Southgate Value Mart. Office vacancies were adversely affected by slow progress in leasing a building in the Harrowdene Park where the lease had expired, and by an unexpected tenant failure. Together these account for approximately 1.5% of the office vacancy, which would otherwise be around 4.5%. 7 581 - ( 225 232) ( 770 289) ( 225 232) 4.9% 11 220 • Level 2: Valuation techniques based on observable inputs, either directly (ie: as prices) or indirectly (ie: derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data. for the 6 months ended 30 September 2013 4.7% Total vacancy 9 820 248 161 - ( 52 734) 346 461 Trade and other payables 286 772 305 573 Net finance cost - 7 581 Operating expenditure 2 579 048 5.7% 37.5% Sept-13 Total 11 220 Total revenue 7 880 388 thereafter 6.4% Retail vacancy 105 812 Unallocated 286 772 Straight-line rental income accrual 3 428 516 Mar-18 26.5% - Reconciliation to profit before taxation in the statement of comprehensive income Unitholders’ funds Mar-17 10.6% Office vacancy 112 429 Segmental earnings Unitholders’ capital Mar-16 8.4% 5. VACANCIES AND BAD DEBTS Fair value adjustments Dividend income UNITHOLDERS’ FUNDS AND LIABILITIES Mar-15 4.9% Total 417 140 817 Segmental net operating income 206 745 Rental and other receivables Cash and cash equivalents Net finance cost Mar-14 62.5% Retail 82 894 9 655 Current assets Total 138 365 Total revenue The expiry profile by rental income is shown below: Offices - International Derivative financial instruments 6 859 7 581 Operating expenditure 4. FORWARD LEASE EXPIRIES 131 506 4 361 Dividend income Investment properties held for sale and related receivables Offices (R ’000) Somerset Mall (50% owned): Sycom has concluded an agreement with Hyprop Investments Limited (“Hyprop”) in terms of which Hyprop will acquire the full ownership of Somerset Mall (post Sycom’s acquisition of the remaining 50% from AECI Pension Fund on 1 October 2013 for R1 150 000 000) from Sycom for a total consideration of R2 300 000 000. This transaction was effected on 1 October 2013. The gain on remeasurement of the property to fair value at the reporting date amounted to R11 920 790 and is disclosed within the fair value gain on investment properties caption on the statement of profit or loss and other comprehensive income. Somerset Mall is a Retail asset for the purposes of the segmental reporting per notes 2 and 3 above. Discovery House (100% owned) Sycom has entered into a sale agreement to dispose of the Discovery building to The Truzen 113 Trust (c/o Zenprop Property Holdings) for an amount of R413 900 000. The transaction will be effective on transfer date, which is expected before the financial year end. The gain on remeasurement of the property to fair value at the reporting date amounted to R5 462 030 and is disclosed within the fair value gain on investment properties caption on the statement of profit or loss and other comprehensive income. Discovery House is an Offices asset for the purposes of the segmental reporting per notes 2 and 3 above. GK EVERINGHAM Chairman Sycom Property Fund Managers Ltd 14 November 2013 PA THEODOSIOU CEO Sycom Property Fund Managers Ltd Transfer secretaries: Registered Office Computershare Investor Services Proprietary Limited Suite A11 Westlake Square 70 Marshall Street Westlake Drive JOHANNESBURG Westlake CAPE TOWN 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, PA Theodosiou*# (CEO), CB Marlow*, GR Jones* Company Secretary: H H-O Steyn * Executive , # British syc/11000/E Granted REIT status with the JSE Limited

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